Tuesday, January 06, 2009

JT Endorses Racine's Subprime Housing Ventures

The following are excerpts from the Journal Times' editorial endorsing the city of Racine's continued forays into the subprime housing business, interspersed with my comments:

JT: Hope isn't a feeling that normally lingers around forclosures, but it might be soon.

DN: Hope... or willful delusion? We will see.

JT: The city of Racine plans to apply for federal funding to buy and renovate forclosed homes....Officials are prepared for ther own version of "Flip This House," but the city shouldn't be in this game for the profit.

DN: No need to worry about profit.

JT: If leaders receive the full $2 million they're requesting, that could cover up to 20 homes. That might not make a huge dent, at least initially. The difference will be measured years down the line.

DN: Very well. We are now "years down the line" from the city's previous forays into the subprime housing market. How about we measure how those investments panned out?

JT: The small size of the project should also inhibit any desires government might have to gentrify the city and push out existing residents.

DN: Yes, this gets to the heart of the problem. The government of Racine, and the JT evidentally, share the view that policy should favor government dependents over taxpayers. Thus they both want to take money from wealth producers and funnel it to people who aren't productive enough to buy a home.

JT: Left to the market, forclosed homes could easily land in the hands of slum landlords.

DN: Let's do away with the market and have the Journal Times decide who gets to buy homes and for how much.

JT: As buildings fall into disrepair and fill with unscrupulous tenants...

DN: Maybe it would make sense to gentrify and "push out existing residents," especially the unscrupulous.

JT: Owners are the ones most invested in a community, and they're more likely to pounce on a home that's already in decent shape.

DN: So who's stopping anyone from buying these homes now? Oh wait, I get it. You want these homes to go to people who can't afford to pay for them.

JT: Racine is already piling up experience in real estate, having taken on several homes from the defunct Southside Revitalization Corp and a few others that were forclosed for nonpayment of city-issued loans.

DN: In other words, the city has experience FAILING in the real estate business.

JT: Affordable homes must be exactly that, and prospective buyers should be scrutinized to ensure the forclosure cycle doesn't start anew.

DN: Banks traditionally are the ones that "scrutinize" prospective home buyers. Anyone who passes this scrutiny can buy these homes now, so this entire program is pointless.... except the purpose here is to get homes into the hands of people that the bank considers too risky. Ie, these are subprime loans we are talking about.

JT: We would hope the city learned enough lessons from the financial crunch to handle this carefully.

DN: Ha, this is funny. The financial crisis was caused by banks loaning to people who couldn't pay pack the loans. And now the city wants to loan money to people that banks are taking a pass on. What has the JT learned from the financial crunch?

JT: Times are too dire for leaders to sit back and wail about what's going wrong.

DN: Yes, dry your eyes and do the same thing that didn't work the last time.

JT: Let's hope the key fits.

DN: It doesn't.

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