I was responding to a comment on my post about Solving Some of the Housing Crisis and I realized that I had just effectively written another post but no one was likely to find it. So I'm going to post the answer here.
Why You Have to Participate in the Bailout (a.k.a. Why do MY taxes have to pay for someone else's house?)
Our society has always been built around those in the know "taking care of" those who are not so bright. Our founders built it into the very fabric of our government using the republic system rather than a democracy as we are often told. This is what the electoral college was originally designed for - to make sure the masses made the right decision. Sadly, this time they didn't and we as a country pay.
Here's Why You Have to Participate
Remember the 80's and the Savings and Loan failures? Remember what a hit that was on the economy? Well take that and multiply it by several thousand and you're getting an idea of the ramifications of what happens if all of the troubled loans foreclose. You're going to pay whether you do it this way or another. Either you'll pay in your property values bottoming out at a ridiculously low price, or you'll pay in your bank going under and the FDIC having to bail out depositors (which it won't have enough money to do if all of these banks fail and therefore, we'll have to raise taxes so that you can get your money from the bank - then I'll be paying for that for you), or you'll pay with the rest of us as foreign investors come in and buy all of the property in the country because it's at firesale prices. We won't have to be conquered as a nation - we'll be owned. It's a bleak reality, but it's there.
It's Not IF You Pay, But How
So, one way or another, you're going to pay. The question we are asking now, is what is the least costly way to do it? In the plan I've offered above, we can hopefully get the money from investors rather than taxpayers, keeping costs low, while at the same time offering the deeded right to repurchase the land, so that we don't end up owned by other countries. Taxpayers would bear the burden of administering the program, but that's it. And it's not a free ride for anyone - everyone is asked to pay for their mistakes in some way, but no one is devastated by it.
If Your Neighbor Were Drowning, Would You Save Them?
This economy is the equivalent of the perfect storm. I know professionals in the industry (myself included) who didn't anticipate the full scope of the decline that we would see in the market. There were too many factors from too many disparate sectors for most people to see the size of the drop coming. In effect, it was the Hurricane Katrina of the economy. We should have been able to anticipate it, and we should have been able to manage it, but we failed. Does this mean that we now allow our neighbors who are stuck on their roofs after the levies have burst to drown in the flood waters that are coming for them? Perssonally, I'd prefer to send in a life boat. They're not getting off easy. They are still going to have to rebuild their credit and pay the consequences of having made a bad decision. But can we spare them the 10-year stigma of a foreclosure when they are otherwise upstanding citizens with nothing else to tarnish their records but being foolhardy enough to wander into the middle of the perfect storm? I don't think so. Perhaps you do.
Drawing The Big Red Dot
One of the things I teach my clients is that it is important to be clear about where you are before you try to move forward in life. Because if you fail to accept the reality of your current situation, then you run the risk of making a bad decision about the future. That's what happened with the people who bought houses they couldn't afford - neither the banks nor they weren't realistic about their current situation and that's how we got here. Let's not make the same mistake they did by assuming that we have a choice about whether to participate in creating a solution to a problem we may not have helped create. Everyone suffers if we don't fix this. Don't fool yourself into thinking that isn't true. If you're honest about the reality of the situation, then you'll see that there is no choice but to act. Then it's just a matter of what action to take to stave off the flood waters until they subside.
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Kelle Sparta
Thought Alchemist
The Shame Factor
I am in Florida with my boyfriend helping the family deal with the disposition of his grandfather's estate after his death this past weekend. As part of this process, I needed to get a quick idea of who the likely buyer would be for the property his grandfather had owned so that we knew whether we had to clean the place out completely (first time buyer) or we could leave stuff in the house for the contractor to clean out. 
So I've been doing some online research to determine who I want to interview for some upcoming programs that I'm creating and I was checking out