AnnotatedOpinions.com

. . . But with plummeting housing prices, many [homeowners] have faced a new reality: their home’s value is worth less than the mortgage. Maybe these owners are still employed; maybe they can still make the payments. But why should they? Financial gurus on cable TV are advising them to walk away, leave the keys in the mailbox, bid adieu to the lender – in short, to default. [AO: The reason financial guru’s advise home owners to walk away is not because these gurus have discovered a new way to dispose of a “troubled” home, it is because this is exactly the contract the homeowner and the his lender entered into. When a lender makes a loan, the lender prices into the loan the possibility that the home value will decrease and the lender will be left holding the bag when the homeowner strategically defaults. This is a risk the lender takes on and the lender is paid handsomely for this risk in terms of interest rates that it spreads across all of its borrowers.  

When homeowners choose not to strategically default, they are unilaterally agreeing to a higher interest rate above and beyond the rate the homeowner and lender agreed to. This higher interest rate goes directly into the pockets of bankers who can then pay record setting bonuses.   

Now, I’m not suggesting that every homeowner who can should strategically default. Instead, I am suggesting that homeowners should not allow ethical intimidation, fear or other forms of pressure to be the goad that is used to keep them in a lending contract when there is an out.]  

Strategic defaulters, though, threaten the larger economy. In 2001, 3.9 percent of owners of single-family homes had “negative equity.’’ In 2009, almost 25 percent had negative equity. If even half of those owners defaulted, there would be more depressed neighborhoods, more troubled banks – and, looking not too far into the future, stringent lending standards that would shut the doors of homeownership to the next generation. Lenders calculate risk: adding the risk of “strategic defaults’’ to their calculus would lead to higher down payments and higher borrowing rates. . . [AO: Strategic defaulters who default on their homes still have to live somewhere. They will rent in the same or another community. Think about it this way: if 25 percent of owners of single-family homes strategically defaulted, we’d need that many more rental homes. In other words, the economics is sifted from owning to renting.   

As for troubled banks, homeowners who contracted with banks cannot be expected to unilaterally increase their interest rate so that so-called troubled banks can continue to pay record bonuses. It’s unfair and unethical. Worse, it’s not part of the agreement between the homeowner and lender.  

Again, lenders were well aware that homeowners had the right to strategically default. Indeed, in many tax and finance classes across the country (mine included) professors have been explaining this to students for decades. Moreover, a number of states, including California and Colorado, are non-recourse states meaning lenders were on notice that they couldn’t even come after borrowers who walk away from their homes.   

Think about it this way: If Bank of America owed Citibank and discovered that the loan was underwater, would it continue to pay Citibank because of a concern for depressed neighborhoods, Citiban’s liquidity, or future lending to businesses? Of course not. Why then should John, who has a home loan with Bank of America, or Sue, who has one with Citibank, continue to pay that loan?  

Lenders already add the risk of strategic defaulters into loans. However, they miscalculated during the last housing boom just like they miscalculated the appropriate interest rates and the loan terms more generally. In the future, lenders won’t miscalculate or at a minimum they will try to be less wrong. Lenders will do this no matter what.]

A Long Way Down: Because many if not most Americans gained little to nothing from the Bush “growth” years, they have found themselves especially vulnerable to the recession. [New York Times]

Fiery rhetoric of Obama’s critics [Chicago Tribune]

The Wyden Alarm: If the Energizer Bunny of health-care reform is worried, we ought to be, too. [Washington Post]

Sen. Ron Wyden

The man who hated hunger: He was awarded the Nobel Peace Prize, the Presidential Medal of Freedom, the National Medal of Science, and the Congressional Gold Medal. [Boston Globe]

Doctors overwhelmingly back a public option [Atlanta Journal-Constitution]

Rapping Joe’s Knuckles: The pressure from House Democrats, and a handful of Republicans, on Joe Wilson to apologize was a rare triumph for civility in a country that seems to have lost all sense of it. [New York Times]

Behind the right’s attack on Obama: Don’t be fooled by the grass-roots image of the tea partyers and the ‘10thers.’ [LA Times]

Merrill bonus case highlights how shareholders get fleeced [USA Today]

Palin, DeMint should take lessons from this guy [Atlanta Journal-Constitution]

Apply the law equally: By dropping a charge against a prominent blogger — but not others charged with the same crime — the US attorney’s office violated the principle of equal treatment. [Boston Globe]

Truth About Lending: Congress should pass a bill that would simplify the student loan system — and save the country nearly $90 billion over the next decade. [New York Times]

From ACORN, a mighty controversy grows: After the release of several videos highlighting atrocious behavior by some of its workers, the liberal advocacy group needs to clean house. [LA Times]

Gulf stewardship: Red snapper catch quotas work Introduction of quotas for the red snapper catch works, and should be a model. [Houston Chronicle]

Smirk Street: Did you ever get the feeling that the person you’re talking to seems to be listening attentively but is actually thinking about squeezing in one more weekend at the beach before it gets too chilly? [Philadelphia Inquirer]

H1N1 smarts: With swine flu having struck more than a million Americans since spring and the H1N1 vaccine still weeks away, the nation’s public health system is bracing for a deluge of patients. [USA Today]

What Sweeney Won: Two of the AFL-CIO chief’s organizing triumphs could reverse unions’ fortunes. [Washington Post]

Norman Borlaug

• Borlaug: Freedom from mass starvation: In praise of a scientist who saved countless millions from starvation. [Boston Globe]
• ‘The man who fed the world’: The extraordinary humanitarian legacy of plant scientist and Nobel laureate Norman Borlaug was a testament to the value of education, hard work, and a sense of wonder. [Philadelphia Inquirer]

Squandering the Moment: If the Middle East’s major players continue to refuse to do what is needed to move the peace process forward, the White House may have to place its own deal on the table. [New York Times]

The polarization card: It is one thing to disagree with the president. It is another to disrespect the office and delegitimize his citizenship. [Boston Globe]

Texting to Death: While stronger state laws are essential, sending and receiving text messages while driving is a national hazard that calls for a firm federal response. [New York Times]

Still Playing the Odds: With the Dow rising somebody needs to slap the incipient grin off Wall Street’s face. [Washington Post]

A rebuilt Wall Street: Taxpayer money — lots of it — saved Wall Street. Now it’s time for the government to rethink its roll. [LA Times]

Conservatives undercut health reform at their peril: As President Obama fired up a crowd of nearly 17,000 in Minneapolis Saturday with tough talk of his determination to win passage of a universal health care bill, tens of thousands of conservatives took to the streets of the nation’s capital to protest that legislation. [USA Today]

The big thaw: As threat of warming mounts, a few find silver linings [Houston Chronicle]

When Free Speech Loses: American companies’ fear and greed are making it harder to publish freely. [Washington Post]

A nuclear waste solution: Yucca Mountain may never be used, but a physicist lays out his argument favoring repositories over costly reprocessing. [LA Times]

Dems’ public option myopia: Right-wing demagogues blathering about “socialized medicine” and “death panels” aren’t the only ones jeopardizing Obama’s health reform plan. Obamacare is also taking heavy flak from left-wing ideologues. And they, in their own way, can be just as kooky. [New York Daily News]

Is it time for Obama to give another race speech? [Chicago Tribune]

Health Care, Eh? In America and Canada, reform is ultimately determined by national identity and myths. [Washington Post]

Evaluating teachers: It seems so simple and fair. Because teachers are hired to teach, let’s evaluate them on the basis of student performance. [LA Times]

A World of Hurt: This recession, a full-blown economic horror, has left a gaping hole in the heart of working America that is unlikely to heal for years, if not decades. [New York Times]

Saturday’s protest: Fed up with deficits or Democrats? [Atlanta Journal-Constitution]

Critical thinking? You need knowledge: For over a century we have numbed the brains of teachers with endless blather about process and abstract thinking skills. But we have neglected to teach them that one cannot think critically without quite a lot of knowledge to think about. [Boston Globe]

High-Five Nation: Today, immodesty is as ubiquitous as advertising. It’s funny how the nation’s mood was at its most humble when its achievements were at their most extraordinary. [New York Times]

$75 Billion Carrot, but Few Nibbles : If current incentives do not produce enough loan modifications, Congress must provide an alternative to help Americans keep their homes. [New York Times]

Tea-Party protesters hate Medicare? [Atlanta Journal-Constitution]

Misinformation, mayhem mar debate on health care [USA Today]

A recipe for controversy: A healthcare reform proposal to require some restaurant menus to carry calorie counts raises heavy questions. [LA Times]

A summer for listening: It’s a rare August, indeed, when health-care policy white papers vie with beach reading lists, and Post-it notes scrawled with “attend town meeting” festoon fridges stocked with cold ones. [Philadelphia Inquirer]

Fringe food lawsuits: Take them with a grain of salt - Demands for warning labels on hot dogs and a listing of sodium contents on restaurant menus bring little common sense to the table. [LA Times]

Back from the brink: July’s economic data, showing an unexpected downward tick in the unemployment rate to 9.4%, are the best indication yet that the economy is turning a corner. [USA Today]

Iran’s crisis as an opportunity: President Obama should resist calls to rescind his offer of negotiations to Iran. [Boston Globe]

A Real Bill for the Climate: The U.S. needs a climate bill that engages the whole economy and forces technological change. [New York Times]

The ins and outs of Kurdistan: Some have suspicions about three Americans held by Iran after apparently straying across the border.  But for those who’ve been there, the story isn’t far-fetched. [LA Times]

Salmon: A dam shame - Friday is the deadline for Obama to show his commitment to the Endangered Species Act by ordering the removal of electric dams that prevent the spawning of salmon in the  Northwest. We think he should. [Boston Globe]

. . . Here are four reasons to be cautious about the economic outlook.

1. Things are still getting worse. . . . The most you can say is that there are scattered signs that things are getting worse more slowly — that the economy isn’t plunging quite as fast as it was.

. . .

4. Even when it’s over, it won’t be over. The 2001 recession officially lasted only eight months, ending in November of that year. But unemployment kept rising for another year and a half.

[AO: These reasons are not independent. Reason #4 may explain reason #1. In other words, things may still be getting worse because even when the downturn ends, things will not begin to improve immediately. Now, don’t get me wrong. I am as much a skeptic of the “end of downturn” talk as the New York Times. However, this tension is worth highlighting.]

The vote by Congress to tax Wall Street bonuses out of existence was economic populism run amok. This was legislating by rage, fear and panic. [AO: Sometimes, Congress is left with no choice. It was necessary to take immediate action to avoid the bonus payments disappearing.]

Dispensing with calm deliberation, they distorted the tax code into a political weapon as a way to blunt the fury of the American public as said fury was about to be aimed not at the greedsters of AIG, but at the whole incompetent lot in Washington. [AO: What does it mean to distort the tax code? Seriously. This is an honest question. Also, where is your crystal ball? How do you know that the American people were about to turn their fury on Washington? Perhaps this is wishful thinking on your part?]

Only recently, after all, the House and Senate approved bonus limits that had the effect of exempting the AIG payments. Both bodies okayed the exemption at the request of the Obama administration. Connecticut Sen. Christopher Dodd carried the ball – and damn if his career isn’t going up in flames.  [AO: Do you have kids? See, you don’t follow your kids around telling them what to do and what not to do at every given moment. Washington thought that AIG was smart enough not to hand out such lavish bonuses. Apparently, Washington gave them too much credit. Would you have written this column if AIG had paid $1B in bonuses even without limitations from congress? How about $10B? Point is, Congress doesn’t what to have to tell AIG how much it can pay its employees. But AIG has given Congress no alternative.]

What Jon Stewart needs is Jon Stewart. He could use a droll comedian to temper his ferocity and correct him when he’s wrong, as he was about the financial media, particularly CNBC and its excitable analyst Jim Cramer. They didn’t cover up the story of financial shenanigans. They didn’t even know it existed.

For proof, I can offer some names. Let’s start with Maurice “Hank” Greenberg, who was instrumental in building what is now probably the world’s most reviled corporation, AIG. He resigned as chairman and CEO in 2005, but still it is logical to assume that few people knew more about the company than Greenberg. He kept much of his net worth in AIG stock. He’s now lost much of that worth. [AO: This opinion starts promisingly but quickly veers into who know what land. The opinion misses one of Jon Stewart’s main points entirely. The point is that CNBC holds itself up as an expert. The network claims to know what’s going on in the market. With minor additional effort, namely investigative journalism rather then cheerleading, these experts could have discovered the financial shenanigans. Instead they cheered the financial industry on.]

The cases for and against U.S. participation in the ICC.

Krugman is concerned for Europe. It’s failing to respond adequately to the financial crisis.

Iran’s No. 1 issue should be human rights, not nuclear weapons.

Stop worrying about the downturn already! You are causing the depression.

Charles Dickens, who visited in 1842, described Washington as a “city of magnificent intentions” because of the incongruity between the city’s grand aspirations and muddy, swampy actuality. Today Washington’s discrepancy is not architectural but political. It is between the extraordinary powers and competences the administration claims it has and the administration’s inability to be clear or plausible about what it is doing. . . .

One afternoon last week, cable news viewers saw, at the top of their screens, the president launching yet another magnificent intention — the disassembly and rearrangement of the 17 percent of the economy that is health care. The bottom of their screens showed the Dow plunging 281 points. Surely the top of the screen partially explained the bottom. [AO: Actually, no. Just because two images are show on a screen at the same time doesn’t mean that there is a causal relationship. Like the rest of your opinion, you’ll have to show us some proof.]

Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it’s become clear that Mr. Obama’s policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence — and thus a longer period of recession or subpar growth. [AO: Short-termism is a problem the Journal will have to get over. The current economic crisis will get worse before it get better. The run-up in the stock market was a reflection of optimism that President Obama would do the impossible. As much as the WSJ would like it to be so, no administration can undo the harm the bush administration over eight years in a matter of weeks. It will take time.  Also, stop using the stock market as the measure of how the REAL economy is doing.]

So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year’s fourth quarter.

What is new is the unveiling of Mr. Obama’s agenda and his approach to governance. [AO: It’s amazing that the WSJ can even write this stuff with a straight face!  If a “sharp recession” had been priced into the market last year, why did the stock market peak on January 2? I’ll tell you why. It’s because the stock market was optimistic that we were about to see the end of Bush. Unfortunately, the market was too optimistic about the downturn and has had to adjust as bad news keeps trickling from companies. One day it’s AIG, then GM and Chrysler, then BoA and Citi, and GE. The list goes on. Anyone who cares to look will see that the stock market has been responding to bad news from private companies, falling each time, despite Team Obama’s best efforts, not because of it. Like I said, we need to be patient.]