The Foreclosing of the American Mind

Prior to this past weekend I had always considered home ownership to be the essence of the American dream. (Apologies for the length of this essay.)

No longer.

That was before I was shaken to my core by a prominent conservative blogger’s proposal on a radio show that the government mail $10,000 checks to families of four and criticism of the conservative-galvanizing rant against Obama’s mortgage bailout plan by CNBC’s Rick Santelli.

I now see a clear and present danger of an American nightmare in which we lose not only our houses, but even the sweet land of liberty upon which houses can be built. Obama and the dems are dangerous, but an even greater danger would be if conservatives lose their nerve.

The $10K check proposal was inspired by revulsion for the bank bailouts; despair for families and small businesses that still can’t get credit; despair for small businesses put out of work by the recession and despair for those that face foreclosure due to recession related loss of income, with the amount of the checks derived by dividing the $800B amount of the bank bailout by 300 million Americans. The logic being that “if we are going to bail out the banks that caused this, we might as well stimulate a consumer economy and give help people stay in their homes.”

But it was obvious that this respected conservative was animated in his fury against the banks by Santelli’s use of the word “loser” and a false assumption that Santelli had reserved his angry opposition to bailouts for distressed mortgage borrowers instead of banks. It turns out that Santelli has been consistent in his rants, but that only the former garnered wide publicity outside CNBC.

I agree that Santelli’s use of the word “loser” is a poor one, though technically correct in that he refers to those that are “losing” their homes, but that what is significant is why his rant resonated so strongly with so many Americans:

Why don’t you put up a website to have people vote on the Internet as a referendum to see if we really want to subsidize the losers’ mortgages; or would we like to at least buy cars and buy houses in foreclosure and give them to people that might have a chance to actually prosper down the road, and reward people that could carry the water instead of drink the water?

TRADER ON FLOOR: That’s a novel idea.

SANTELLI: No they’re not, Joe. They’re not like putty in our hands. This is America! How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills? Raise their hand.


President Obama, are you listening?

TRADER: How ’bout we all stop paying our mortgage? It’s a moral hazard.

SANTELLI: We’re thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I’m gonna start organizing.

Of course, many people facing foreclosure in this crisis are identical to people that have lost homes since the first home loan centuries ago. They lost their job due to no “fault” of their own. If a government program to abrogate mortgage contracts to prevent foreclosures was appropriate, certainly the best argument would be that we help those without fault. But that has never been advanced as a reason for such a program and isn’t a prominent reason for the Obama plan.

No, the main reason advanced for granting a civil right to stay in homes to a special class of borrowers from 2003-2007 is that the “collateral damage” is unacceptable. Yes, there is also the claim that so many borrowers were duped by “predatory lenders” (an insult to the intelligence of average Americans), but surely that moral claim is inferior to the one that could be made for the newly unemployed. Remember, this crisis began before a great rise in unemployment. We are also told that millions would be rendered homeless, but given they weren’t homeless before and the fact of available rental apartments, we dismiss that as a lunatic scare tactic.

The collateral damage we are invited to fear is the effect of so many foreclosures on the banks and on the values of the property of their neighbors. Even Charles Krauthammer has bought into the latter argument despite his earlier recognition that recovery cannot begin until a “floor” in housing prices is reached.

The Obama plan repeats the Fannie/Freddie policies that caused the bust in the first place by keeping people in homes they can’t afford and trying to prevent further drops in prices.

We were told that Banks were too big to fail and now some conservatives consider the rest of us too little to fail?

This gets to the crux of the “foreclosing of the American mind” but first let me be fair to my conservative friend’s reasoning and be brutally honest about my underlying fears concerning the nerves of the American people in this crisis.

I wrote “A Hard Time vs. Hard Times” last year during the credit crisis and suggested that no matter who was elected, Americans would face a test of character because even if the government implemented perfect supply side and bank stabilization policies we faced a hard time for a year or so due to the natural consequences of the loss of wealth and lack of savings. We would face long, hard times if we fail the test of character.

Now, let me address the arguments for the $10K check proposal that this is a unique situation from normal recession cycles and that since we are a consumer driven economy that we should stimulate consumption in this way.

I would concede that there are unique aspects to this crisis of government policy failures, but that the cause of same does not suspend the rules of human nature re debt and savings and that therefore, time is required to solve the matter, along with correct policies. People will have to save money before they are comfortable taking risks on spending and investing. Government policies forcing banks to eat their loans will deter future lending. And if writing checks to people would solve the matter, then the USSR would have been Shangri La.

Throwing money at the problem to relieve all present suffering and hoping it reduces the length of the recession, when time for healing is baked in the cake, only exacerbates the problem; lengthens the recession; increases the danger of inflation; and threatens to foreclose the American mind.

Included in “all present suffering” is the holocaust of having to move and rent; the calamity of living in an owned home with less equity; and the deluge of consuming less goods.

I am reminded of the reactions to Katrina here and abroad. Foreigners marvelled at how few died and how little suffering was had due to rescue efforts and our government safety net. Too many Americans saw a reporter on camera with a refugee within 24 hours and concluded that since Shepherd Smith was there surely Bush should be there with manna from heaven to prevent more than 5 minutes of suffering and all refugees in the Waldorf-Astoria watching cable before midnight.

How did America become America?

It didn’t become the most prosperous, benevolently powerful, liberating force in history by pain avoidance. We have seen what happens when government is Daddy. In the USSR the right to a home turned out to be the right the share a two room apartment with three other families (see Ninotchka). In Europe, it means that you have a perpetual state of mediocrity and an inability to defend oneself from foreign enemies. It is only because the United States stands in the way of the usual course of history’s conquering despots, that most of the free on Earth are safe.

And now we get to the crux of impending mind foreclosure: Why is it that the United States is so wealthy and strong that we can have obese folks in poverty and still out gun slave holding tyrants?

Life, liberty and the pursuit of happiness

Especially liberty and the pursuit of happiness and its lynch pin element of the right to private property. One has the right to the fruits of one’s labor. Our system has encouraged people to take risks, and the facts are in after 5000 years of human history and 233 years of American history: our system that allows success and failure results in less suffering and more happiness than all the other systems.

We revere so many of our forefathers for their great sacrifices, from the Pilgrims and Washington’s army (at Valley Forge, pictured) thru the Greatest Generation that endured the Great Depression and won WWII.

They suffered to make and keep this nation exceptional. They were not bailed out. They rejected the class envy of France and class system of Britain.

Current government policies threaten to discourage risk taking, because for every person bailed out, there is a person that is bailed on. The producers of society won’t produce if the prospect of getting bailed on is prominent.

As for the banks, I do see a distinction between them and the rest of us, but was against the Paulson bailout. However, it is the duty of government to regulate a banking system. It may have been best to let some banks fail last year. I don’t know what those consequences would have been. (Many believe that had Hoover not passed Smoot-Hawley and raised taxes after the 1929 market crash, that the recession would have ended in a year or two. I don’t know.)

But the fact that we may have made mistakes in trying to save a necessary institution of free enterprise in banking, would not lead me to give up the ghost on prudent fiscal policy and propose a massive expansion of the welfare state safety net for the truly needy to re-define “truly” as avoiding having to move and rent.

My mind is open to policies I would reject out of hand in non-crisis times, but we must keep our bearings and not lose sight of values essential to our long term prosperity by dumbing down acceptable suffering in an affluent society, or we will lose the ability to stay or regain affluence, and with that, Liberty itself.

Remember the suffering of those at Valley Forge; keep this hard time in perspective; never lose hope; never give in to despair and join me in the fight to keep the lights of the Shining City on a Hill burning.

Remember the Battle of New Orleans, when the Brits held Washington, D.C. and threatened to tear America asunder. One man with courage made a majority in 1815 and brought us back from the brink against the greatest army on Earth. (General Andrew Jackson pictured)

We can prevail against an army of community organizer-in-chief led acorns if we don’t give up.

Mike DeVine’s Charlotte Observer, Examiner.com and Minority Report columns

“One man with courage makes a majority.” – Andrew Jackson

Originally published by Mike DeVine, Legal Editor for The Minority Report