The Peanut Jar

I've heard tell of a way to catch monkeys. Put out a heavy clay pot, with some peanuts in it, and an opening just big enough for the monkey to reach into the jar. The monkey sees the peanuts, reaches in and grabs a handful. The monkey-catcher leaps out and the monkey, unwilling to drop the peanuts from its fist, cannot extract itself from the heavy clay pot and is easily netted.

Every day the news is filled with dire news about the sub prime mortgage meltdown. I say the news should be about the greedy monkey with a fistful of interest income. It seemed simple to me to refinance these loans, thus keeping people in their homes and assuring the banks a profit, and saving the global economy in the process.

But the greedy monkeys won't drop the peanuts. Wall Street says they sliced the mortgages into tranches and traded them as derivatives, and if we refinance the loans, then profits will be lost. Seems to me like profits are being lost right now, wouldn't you say?

Government is trying everything. Throwing money to the crowds like Nero did. Hey, that's always a crowd-pleaser. Going into the mortgage business themselves and bailing out Fannie and Freddie. Buying stock. Reducing interest rates. But what about addressing the root of the problem, the fact that people can't make the payments on their loans?

I want to say that I do not blame those who got into the loans. Divorces happen. Spouses die. Companies go out of business and jobs are lost. Retirement funds are looted by crooks. I remember when I moved to this house, and how a mortgage broker took me into a room with some guy with a calculator and pocket protector and browbeat me for an hour (they would call it a "sales pitch") about the wonders of a reverse-amortization, variable-rate loan. Their way, after a few years I would owe more than I had paid for the house, and the rates would be ... well, whatever. What do I have now? I walked out, went on the internet, and got a conventional, fixed-rate loan. I paid additional principal, and after 4 years refinanced the 30-year loan as a 15-year loan at 5%. So, who was better at this? The professionals who were going to extract a fee for their genius, or me? It helps to understand math and the internet. Not everybody does.

My first house, a little $65,000 home, would have cost a quarter million dollars by the time I had it paid off. Think of the interest! Anybody reading this ... if I give you $100, will you give me back $400? At what point does this become usury?

By now you're wondering where I'm going with all of this. People were taken advantage of, or got in over their heads, and are at risk of losing their homes, and that has in turn put all of us at risk. But because some high-rollers won't open their fist and unclench the tranches and derivatives we're all stuck attached to a heavy clay pot. Here's my solution. The government passes a law to crack that pot open, one mortgage at a time. Somebody says, "I want to refinance, help me out." The government follows the paper trail, one mortgage at a time, and whenever they come to some monkey with a stuck fist they offer two choices. Unclench your fist, and drop this mortgage (sign here) ... or we can go into another room and discuss the penalty for usury. Usury has a long tradition as unchristian, and maybe we should consider updating our laws to better define what is to be tolerated in our society.