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Our Obsession With Ownership

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Homeownership is overrated and the government went too far in pushing it on the American people, Paul Krugman writes in today's New York Times. He suggests it's time for America to "drop the obsession with ownership."
We couldn't agree more. Four months ago we wrote: "The social engineering program entitled the 'ownership society' has failed and ought to be abandoned."

It's important to remember that however greedily mortgage lenders piled into the ownership society with their liar loans and interest only, adjustable rate loans, the underlying policy was a special kind of compassionate conservatism--that is, a policy informed by the good intentions of people who believe in harnessing the market to enrich themselves while encouraging social progress.
Now it may be going to far to say that all roads paved with good intentions lead to Hell but a traveler looking back on the roads travelled by American society over the past few decades could be forgiven the overstatement. This isn't the place to run through the entire gamut of well-begotten social engineering programs. The list is too long for workday reading, and the results too depressing for a day in which the Dow has flatlined.
So let's stick with the one on everyone's mind. We termed it The Great Homeownership Experiment. The proximate cause goes back to the early years of this decade, when the newly elected George Bush decided to make the increase of homeownership a central part of his presidency. Indeed, he declared that those who resisted the call to push homeownership beyond the natural limits of the marketplace un-American, un-Christian and very possibility racist.
"The only way we can have a better society is to make sure those who don't have a house have the opportunity to get one," Angelo Mozilo said. The fact that he could, as the head of Countrywide, become fabulously wealthy while doing this is evidence, we suppose, of the conservatism of this compassion.
Krugman points out, however, that our obsession with ownership goes back far further. Through tax breaks and other incentives, we punish renters in favor of owners. Renters are somehow treated as second-class citizens, perhaps event dangerous dissenters from the American dream. But now that the dream is fast becoming a national nightmare thanks to the well-intentioned plan to make it a reality, we can't help but nod our heads when Krugman urges that its high time we "try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream -- and still have a stake in the nation's future."

Home Not-So-Sweet Home
[New York Times]


Are You A Financial Services Company Stuffed To Gills With Toxic Assets And/Or On The Verge Of Bankruptcy? Don't Hold Your Breath For Brian Moynihan's Call

Time was, Bank of America loved buying companies. Bonus points if there was a not-so-subtle suggestion by the target's CEO that BofA would one day be very sorry for doing so, or that they would've been better off picking up an asbestos manufacturer, or that they were looking at roughly $40 billion (and counting) in legal fees associated with fuck-ups that were to become Bank of America's problem, or that they would have night terrors for the rest of their lives about signing those papers. As it's been a while since BofA went shopping, some in the financial services industry have been wondering if we can expect any announcements re: big deals anytime soon or if Ken Lewis's unsolicited suggestions (Groupon, Sino Forest, The Thirsty Beaver, and most recently: "a P&C insurer with outsized exposure to the Northeast") are or have ever been under consideration? Sadly for fans of the Lewis Era/style of doing business, not so much. Mr. Moynihan said in response to an audience question [at the bank's two-day investor presentation conference for financial companies at the Plaza hotel] that the bank has "no acquisition plan at all." BofA's Moynihan Says Fiscal Cliff Impact Already Happening [WSJ]

Angelo Mozilo: Countrywide Was The Cadillac Of Mortgage Lenders

In June 2008, Countrywide founder and CEO Angelo Mozilo stood before a group of CFC shareholders and, through salty tears, told them that Bank of America would "reap the benefits of what we have sowed." He wasn't kidding, and in the 4+ years since Ken Lewis paid $4 billion for the place, BofA has had the pleasure of ponying up an additional $40 billion (and counting) in write-downs and legal fees associated with cleaning up Countrywide's messes, while CEO Brian Moynihan has publicly described the acquisition as an albatross around his neck. Additionally, Ang Moz forked over $67.5 million in 2010 to "resolve SEC claims that he misled investors," and separately, there has been talk by some that Countrywide contributed in no small way to the worst financial crisis since the Great Depression. In light of all that, does Ang Moz, have any regrets about the way his company was run? Not a fucking one and if he had to do it all over? He wouldn't change a thing.

Bank Of America Briefly Considered Unburdening Itself Of The Drunken Mistake That Was Countrywide

And then decided that sticking with the "worst deal in the history of American finance," which has cost it $40 billion in cleanup so far, made them at least look like responsible adults, facing the consequences of their actions, rather than deadbeats trying to take the easy way out. Long before Sanford Weill suggested last week that big banks should split up, Bank of America executives and directors considered the idea and then decided against it, said people close to the nation's second-biggest bank by assets...Chief Executive Brian Moynihan and his team looked at a possible bankruptcy of Countrywide Financial Corp., the troubled mortgage operation it purchased in 2008. Management also studied whether it made sense to break off Merrill Lynch, the securities firm it purchased in 2009. Mr. Moynihan ultimately recommended to his board that neither action made sense. The company decided Merrill had become too big of a profit center and splitting it off could expose the brokerage firm to the sort of funding problems that killed off other Wall Street firms in 2008. Meanwhile, it felt bankruptcy of Countrywide might invite more legal and reputational troubles for Bank of America while exposing other subsidiaries to problems. Bank Breakups, Not So Fast [WSJ]