Tuesday, May 26, 2009

Dealing with Mass Foreclosure

Foreclosure is an awful thing. Rewriting contracts willy-nilly is also an awful thing. And moral hazard is a Real Problem.

So, if I were king, my solution to the foreclosure crisis would be the following:

1. Create a temporary state called "in-place foreclosure". At the lender's choice, allow an RTC-style entity buy the house from the lender, but let the buyer stay in the house and rent the place for a period of several years. This rent should be an affordable percentage of the person's household income. The price would be local market price; yes, the lender would likely take a big haircut.

After several years of "probation", the buyer can petition to re-buy the house at a market price with a market-rate fixed mortgage. The buyer would be responsible for maintaining the house and part of the early rent would go towards a deposit that would be refunded to the buyer or credited toward a down payment - or used for repairs if the buyer trashes the place.

If they don't pay the rent in the meantime, they're evicted. If they choose to move away during the "probation" period, they can choose to do so and the holding entity can then sell the house or rent it again.

The purpose of this approach isn't to reward "foreclose-ees", but to avoid neighborhood collapse due to mass foreclosure, to let the market clear quickly, and to minimize moral hazard.

One other point: I'd only allow this in places where the market is thin and the chance of "neighborhood failure" due to mass foreclosure is high. Places with active RE markets would not qualify. For example, in CA, Modesto and Stockton would likely qualify, while San Jose would not.

Tuesday, May 19, 2009

The "first X names in phonebook" approach to selecting Congresspeople

Here's a lunatic fringe idea: have far fewer elections. One problem we have is a political unwillingness to confront unpleasant realities, because the politicians who table solutions to these ideas see no political upside and vast political downside. For instance, any attempts to address Social Security and Medicare with anything but higher taxes will get demagogued to death. Higher taxes are slightly easier, but even these have little upside.

And as everyone knows, the only real answer is the sort of Painful Choices that elected politicians hate making, because they'll piss everyone off.

My idea here is based on how we select juries: have a much bigger Congress, so individual members aren't quite so powerful, and simply draft them the way we draft people to serve on juries. One approach would be something like this:

1. Have a single eight-year term.
2. People may opt-out of the Congressional draft.
3. 1/4 of Congress is drafted every two years.
4. For the first two years, a Member is a "learner" and may not always vote, although if there's a very close election, the learners can vote to break near-ties. My guess would be if a vote is within 1%, the learners vote.
5. I'm not a big demagogue when it comes to Congressional pay. We need the pay to be high enough so that people in all walks of life want to serve, and to make corruption expensive. If pay is too low, nobody with a life will want to serve.
6. There needs to be enough Congresspeople so their votes represent a statistically interesting cross-section of the American population.

Since I'm not completely opposed to elections - nor to the idea that "elites" have something useful to contribute - I'd keep a bicameral legislature with a Senate either directly elected or appointed by State legislatures**.

If we did the above, Congress would once again be able to claim to be "the people's House".

** See later "crazy ideas" about empowering States

About Random Idea Generator

1. Ideas, not criticism

One thing I generally dislike about the blogosphere is its lack of innovative ideas. For every blog post with an interesting policy idea, I see about 1000 articles with random criticism, or criticism of the criticism, or ranting about the general evilness of the other side.

Criticism is not interesting. It's hugely important when done right, but if you're only a critic, you're always playing defense. You've already surrendered to the person putting ideas on the table.

I'll definitely do my share of criticism, but I'll always try to do it in the context of tabling ideas.

2. Where I come from

My personal politics is probably best described as "classical liberal", with a streak of libertarian, as well as a bit of Jacksonian hawkishness. I'm not religious, and while I probably live a "socially conservative" lifestyle, I'm more of a "life and let live" type - and insist that anyone promoting a lifestyle leave me alone.

I usually vote Republican, especially since Democrats in my area are hard-left statists who are in bed with civil-service unions.

However, I concede that the modern welfare state isn't going to disappear anytime soon, and there may be uses for it. Therefore, many of my ideas will not so much challenge "first principles" of the welfare state as put forth suggestions for other ways to do things, although I will throw out random ideas that are "out there" (such as my increasing distaste for elections and electoral democracy over other possible forms of having a "government of the people, by the people, and for the people").

Let the games begin!

Wednesday, May 13, 2009

This is a test

This is a test.....