More Idiotic Overreaction to The Mortgage Mess: Jesse Jackson's 'Marshall Plan'

Compounding the months-old Congressional hand-wringing over the subprime mortgage mess is an editorial in the Wall Street Journal on 7 December by Jesse Jackson.

A failed Presidential candidate and liberal-issue gadfly, Jackson weighed in with a piece ominously entitled "A Marshal Plan for Mortgages."

His opening paragraph contains this sentence,

"But for the two million homeowners who face foreclosure over the next year because of the subprime mortgage crisis, their New Year's hopes rest not with themselves, but with policy makers in Washington and the investment community on Wall Street."

Wait. They face foreclosure "because of the subprime mortgage crisis?" I thought we had a mortgage crisis because of the behaviors of these delinquent or defaulting consenting borrowers.

Maybe I missed something. Or, more likely, Jackson simply misunderstands the concept known as 'cause and effect.' Perhaps this was not taught in Jackson's bible college?

Then Jackson gets down to his real message,

"It's time for another U.S. government-sponsored Marshall Plan. But instead of reconstructing Europe after World War II, today's Marshall Plan for mortgages would restore homeowners' and investors' confidence and dreams.

We already have a model for such a plan. It has been used successfully several times since the Great Depression, and has always worked. That model is the Reconstruction Finance Corporation. During the Depression, President Hoover used the independent government agency to provide $2 billion in aid to state and local governments, and for loans to banks, railroads and other businesses. Subsequently, President Roosevelt used it to finance the most creative aspects of his New Deal.

If we can save the S&Ls, we certainly can save homeowners with subprime mortgages. And whatever you call the revived agency, whether its middle name is Finance, Trust or even Mortgage, it is needed to rescue those Americans steered into subprime, adjustable-rate mortgages, often laced with hidden fees they never knew about."

He's not shy, is he? Nor stingy with your tax dollars. Even as he mixes metaphors. The title refers to the Marshal Plan, which reconstructed a ruined Europe after WWII, in order to prevent those still-free countries from falling under communism's hold.

However, in Jackson's text, he actually wants the RFC resurrected. Which is it, Jesse? Can't you get your request straight in even a relatively brief editorial?

I won't even touch the 'most creative aspects' of FDR's New Deal, other than to muse that maybe these were the unconstitutional parts subsequently struck down by an unpacked Supreme Court?

But, to Jackson's points. First, we aren't in the Great Depression. We haven't had anything near the equivalent of the original Black Friday of 1929. And the S&L's weren't saved, so much as forced into taking actions that altered their sector forever. Many went out of business, Jesse, because they lent long and borrowed short.

The moral there, and again, now, is that businesses and consumers must be made to pay the consequences for their economic decisions. That's the American Way. You have the freedom to succeed, or fail, Jesse. We can't just start handing out absolution, willy-nilly. Lessons learned by unwise, imprudent investors, lenders and borrows won't be soon forgotten.

Near the end of his plea for governmental intervention, Jackson writes,

"We must move immediately to adopt this Marshall Plan for mortgages or face the prospect of entire neighborhoods and communities becoming depressed and potentially abandoned. Unless we act, the crisis will continue to snowball. On Jan. 1, the interest rates on hundreds of thousands of home loans are scheduled to balloon, triggering an avalanche of foreclosures. Finding a permanent answer to this crisis should be a priority that unites all Americans, regardless of political party, ethnic background or income level. Financial institutions, politicians and local communities must work together to restructure mortgage loans and stem the rising numbers of foreclosures."

Jackson doesn't cite any facts or data in his closing call to arms. And, knowing he's not an economist, I'm not inclined to simply believe his hyperbole. It reads to me like a Jackson homily/diatribe- use the right phrasing and emphasis, and you can skip the facts.

And, by the way, a recent Journal editorial noted that recent analysis is showing that a surprising number of now-troubled mortgages were, in fact, instances of borrower fraud perpetrated on lenders and investors! Painting the entire situation with a broad brush is sure to have a host of negative consequences- rewarding imprudent adult borrowers, as well as fraudsters.

Better to just skip this idea of Jackson's. But if he thinks it's this serious, I'd welcome seeing Jesse donate most of his net worth to the cause and wear sackcloth instead of his usual expensive suits.