Ohio Socialism Watch, episode 1
Wednesday, February 25th, 2009 By David Hansen
The Ohio House Committee on Housing and Urban Revitalization held a hearing today on HB 3, a bill to “address the current mortgage foreclosure crisis.” From what we’ve been able to learn (the bill is still in ‘placeholder’ form), the sponsors would effectively ‘nationalize’ in Ohio the private contract between a home loan borrower and lender, even if the Feds were to pass on this.
We expect the bill to include a mortgage payment moratorium as well as ’cramdown’ provisions where state judges would be given the power to rewrite mortgage provisions. Together these provisions would change the relative situation of debtor and creditor originally established by contract. By violating the sanctity of the voluntary private contract that structures the utilization of private property in free market economies, these moratoriums and cramdowns would compel creditors to give up value of their private property for political ends.
Remember: Socialism is a centrally planned economy in which the government controls all means of production. By aquiring control over the contracts that utilize private property, goverment is aquiring control of a means of production and subjecting it to the central planning of politics and politicians. If HB 3 were to become law with these provisions, it would be a step toward socialism in Ohio.
For more on the mortgage foreclosure issue see our new policy brief by Marc Kilmer. Marc shows how the proposal not only takes a sledgehammer to one of the central tenets of economic freedom in Ohio, is at the same time unconstitutional, redistributes wealth and opportunity from those who pay their mortgages to those who don’t, and is simply the wrong solution for the wrong problem.
Tags: cramdown, foreclosures, mortgages, Politics, Socialism
February 26th, 2009 at 7:37 pm
Oh no! The Reds are coming!
OK, now let’s settle down.
Sitting down? I think this is a bad idea, too! Just for somewhat more boring reasons.
I just read where a court allowed Delphi to void its contractual obligations to fund its workers health care and retirement. Why no socialist panic here? Because we have a system in this country that allows for this–called bankruptcy. Courts routinely void and modify contracts, and everybody moves on.
Sometimes the rules of the game favor creditors (see President Bush’s bankruptcy “reform”). Sometimes they favor debtors (such as this and similar proposals in Congress). Such is the pendulum of politics. Still–the concept is hardly socialist.
The problem with the new proposal is that it creates a permanent solution to a temporary problem. The temporary problem is the collapse of the housing market. If we accept that bailouts are the solution du jour (and let’s at least accept it for the sake of this argument, since the bailout train has left the station anyway), then we can stomach banks, auto companies and mortgagors getting some help even if they do not deserve any help.
And in regard to mortgages, this is what President Obama is doing with some of the TARP money. He has provided incentives to banks to renegotiate loans with their borrowers. And since foreclosure has become somewhat worthless to the banks (why foreclose on a house you can’t sell?), this should provide sufficient incentive.
At some point, the TARP money runs out, and hopefully, so does the housing collapse, and we are restored to some sort of normal conditions.
The problem with the proposal at hand is that it shifts costs to successful borrowers forever. There is no need to do this, especially when there are temporary solutions available.
Boring? Yes. Socialist? No. Still, oddly, we agree.