[As an aside, if you can ignore the moral failings it's an excellent example of an alpha reframe. No wonder he can keep finding new wives.]

In a related note, a “conservative evangelical” leader actually has the courage to call out Callista Gingrich for her own moral failing of being a married man’s mistress for eight years, and the reaction of other “conservative evangelicals” is stunned awkwardness – not at the woman’s behavior, but that this religious leader would dare to point out that she bears her own element of culpability. Of course, she has only been married once, so it’s irrelevant that she was banging a married man for eight years.

This is the state of our supposed “moral majority,” folks.

But beyond that, the mortgage forbearance plan described is bad policy. It’s not at all obvious that it’s bad policy because most people don’t understand enough about how banks and mortgages work, but it won’t take a very long education at all to see why this is yet another quite large bailout to the people who made stupid loans in the first place. At the same time, it’s very mild (at best) in how it helps actual homeowners, and in the long run it might actually cost them more depending upon details of the plan.

Let’s start with how this is actually another bailout for the banks in disguise. With just a little bit of knowledge about how mortgage loans work this becomes pretty obvious.

We’re going to assume that you purchased a home for $100,000 with 100% financing at today’s low, low interest rate of 3.2% on a 30 year loan. This makes the math pretty straightforward so it’s easy to follow. It also shows that what I’m about to describe holds true even for the best of borrowers with perfect credit and a home that’s truly within their means.

In today’s world, the vast majority of mortgages are not held onto by the organization that originates it. In simpler language, the guy who gave you the money may not be the guy you pay it back to. Instead, that person sells your mortgage to somebody else who hopes to make a profit off of it. How does this work?

To a bank, your $100,000 loan is worth a lot more than $100,000. To be precise, this particular mortgage is worth $193,188.07 – the total amount that you’ll end up paying the bank over 30 years. Or, at least, it’s worth pretty close to that. In reality there are costs associated with the loan, too – collection administration (somebody has to accept your mortgage check and cash it, or chase you down if you don’t pay on time), escrow account management, etc. Also, there will always be some chance that the homeowner will default. Let’s say, for the sake of argument, the buyer of the loan has figured out that over 30 years this is going to come out to about $25,000 in costs on this $100,000 loan. So to that buyer, the loan is worth approximately $170,000 in income (I’ve rounded a bit, don’t sue me) over thirty years. The person who gave you the loan originally only spent $100k plus some administrative costs (we’ll ignore those for this simplistic example), so they’ve only paid $100,000.

At some price in between, it’s a good deal for the originator of the loan to sell it to somebody else to maintain it for thirty years, and also a good deal for that somebody else to buy it. The mortgage originator gets all of his costs back in one lump sum, plus some profit, so he can go out and give somebody else a loan. The buyer of the loan gets a 30 year revenue stream that is, over time, worth a whole lot more than what he’s likely to pay. So they strike a deal. Let’s say that they settle on $135,000 – exactly meeting in the middle. The buyer of the loan has now spent $135k on the house that only cost you $100k.

Now our out-of-work homeowner enters the picture. That person can’t afford the mortgage anymore, so he wants to do a short sale or let the bank foreclose. Let’s assume a foreclosure here, and also assume that the bank can actually still sell the house for $100k (both bad assumptions, but they represent probably the best case for the bank in this situation). The person who bought your mortgage and is now servicing it sells your house for $100k, but they spent $135k on the house. Suddenly they’re out $35k, and things aren’t looking too rosy for them.

Note that this scenario assumes that they foreclose on your house on day 1 and you haven’t paid them back anything yet. This house carries a $536.63 monthly payment on it, so if you’ve been making payments for a year they’ve recovered a bit less than $6.5k of that $35k, but it still means you have to live there for almost 6 years before they break even if they have to foreclose.

Just as importantly, they’ve also lost an income stream going forward, and now they have to find a way to make that back up – or just live with lower profits. Investors aren’t going to like that too much.

Enter the Freddie Mac forbearance plan. Instead of foreclosing, these banks are now giving the owners a year to find a new job. A pretty good portion of the homeowners are probably going to be able to do so. Now, instead of eating a $35k loss, these companies have only lost a year’s worth of revenue from this loan, or $6.5k. But more than that, they haven’t even lost it. The homeowner still has to pay it back, so all they’ve done is postpone that $6.5k in revenue.

It might be even worse than that, depending upon how interest is handled. I haven’t yet been able to figure out if interest accumulates on the loan over that year or not, but I’m willing to bet that it does continue to accumulate. This means that homeowner is going to have to pay back significantly more money than the $193,188.07. Exactly how much more it costs will very depending upon how far into the loan each home is, but it’ll be a couple of thousand dollars per home. So the banks have been given a deal: postpone $6.5k in revenue (you’ll still get it, just one year later) and you’ll get an extra couple of thousand over the life of the loan. This isn’t exactly a terrible deal for the banks even given no other alternatives, but when the alternative is a $35k haircut, this is a terrific deal.

For the homeowner, on the other hand, the deal ranges from “meh” to terrible, depending upon individual circumstances. In today’s environment where the house is very likely worth less than the mortgage, he still can’t move to find a better job in another location. He still can’t sell it and downsize to a home he can more realistically afford. He’s very likely to actually have to pay the bank more money over the long term. His credit report is likely to still take a beating (no word on how this will be recorded yet, but I doubt it will be good). So he’ll still be able to borrow money (probably), unlike if he’d had a foreclosure – but likely at terrible interest rates. Again, a win for the banks.

At best, all he’s really gained is a year to find a new job so he can keep his home. For some people, perhaps many, this will be better than nothing or even a positive thing. But make no mistake, the banks are getting the better end of the deal by far.

I want to make it clear that I’m not at all sure that a bailout for anybody is the correct answer, morally or practically. But if you decide that a bailout is needed, this is the wrong bailout both morally and practically. A far better solution would be to help the homeowner actually pay down the principal of the home. Help make up some of the difference so that the homeowner can actually afford to downsize to a lifestyle he can actually afford, or so that he can move to find another job that pays the same.

Morally, this helps the people who really need it – the regular Joes who did nothing wrong except buy their home at the wrong time (peak of a bubble) and then get laid off – instead of big banks. So what if a couple of big banks go bankrupt? New banks will rise from the ashes. So what if a handful of rich assholes take a bath and lose some money? They’ve got to live like the rest of us now? Cry me a river.

Practically, this helps the economy more. New, stronger banks will emerge from the ashes of bankruptcy and continue on. At the same time, you’ll free people up to be mobile again, making it much easier to pair employees with the jobs that are actually open. Not least, typical consumers will have money to spend again – no small thing in an economy that is so heavily consumer driven.

This plan is better than HAMP, but that’s faint praise. It’s nowhere near as good as the best two options: do nothing, or bail out the actual homeowners.

Freddie Mac announced this afternoon that it will allow unemployed Americans up to a 12-month forbearance on their mortgage payments. According to the statement, Freddie Mac will allow mortgage services to extend 6 months of forbearance without approval and up to 12 months with their approval.

Freddie Mac says that 10% of delinquencies on its mortgages are tied to unemployment.

MOTHERFUCKERS!!!

So let me get this straight. Right as I’m about to get fucking laid off, Uncle Sam uses my fucking tax dollars to bail out the motherfucking banks. Then I get laid off, I don’t qualify for DAMN thing to help me out when I need it, and finally – six months AFTER my home is FORECLOSED ON, when I’m gainfully employed again and paying a shitload of taxes – they decide that it’s time to offer 12 months grace period to the unemployed?

FUCK YOU, FREDDIE MAC.

I was not a huge believer in our welfare state before I got laid off, but you’d better fucking believe that I’m not for it now if it’s not even going to help me out when I need it.

I will never again vote for another tax increase on myself, no matter the reason.

I will never again vote to bail out anybody else. I will vote for anything that bails me out only because I pay so much fucking taxes and I want some of it back.

I will never again vote for any kind of welfare.

In most election cycles, this means I probably won’t be voting very much. So be it. At least I won’t be complicit in my own enslavement. Thankfully in this election, for perhaps the first and perhaps the only time in my life, I have a choice that meets these criteria and I can vote for Ron Paul. Whatever faults he has (and I definitely don’t agree with him on everything), he can at least meet these criteria. I will be voting for him in my state’s Republican Primary, and I’ll be voting for him in the general election – as a write in, if I have to.

As much as I’d like to hope that the second half of my prediction will also be proven wrong, at this point I stand by it. Ron Paul has an outside shot at winning the nomination still, but it’s a pretty long shot. But then, it was always a long shot.

Caveat: I support Ron Paul in this election, and he’s one of the very few political candidates I’ve ever donated money to. It’s not that I agree with him on everything. I don’t. 10 years ago I would have, more or less. I’m a lot less libertarian now than I was then. However, I support Ron Paul because I think Vox nailed it:

There are actually only two distinct candidates in the 2012 election. There is Ron Paul, who represents the U.S. Constitution, and there is Newt Romney O’Bama, who represents the Bank Party.

But aside from my support, I actually think he’s going to pull off a victory in Iowa.

Why? Because it’s a caucus and not a primary. Love him or hate him, Ron Paul defies all logic as a politician. His entire political career is built around defying every rule of politics there is, yet he keeps getting re-elected to Congress. In the last three elections, he won his district by 60%, 70% and 80% of the vote respectively. His secret is that he spends insane amounts of time traveling around his home district and meeting with his constituents in person, and they love him for it. When the man gets in front of small groups, he has an ability to win them over that most politicians simply lack. The Iowa caucus plays completely to his strengths. He gets the chance to get directly in front of a lot of voters and argue his case, and this is where he thrives. Ron Paul is the 2011 Denver Broncos of caucuses. If it’s a close game in the 4th quarter, he’s going to win.

So, where does he go from there? Does his campaign have a snowball’s chance in hell? I think yes, but it’s still a long shot.

The talking heads love to go on about Ron Paul having a very low “ceiling” of voters, because polls tend to show high percentages of voters who “wouldn’t even consider” voting for him. However, I’ve noticed an interesting phenomenon among conservatives that I know, especially those who lean Libertarian. Many of them, publicly, will never admit to any Ron Paul leanings. But privately, they’ll admit that they might actually consider it except that he’s completely un-electable. To a degree, however, this is a self-fulfilling prophecy. A candidate who is viewed this way will never, ever actually get elected – unless they actually accumulate enough support to start winning something.

Witness Sarah Palin, Michelle Bachman, Dennis Kucinich, and various others. In every case, they are viewed as inconsequential (a view that’s definitely helped by the media insisting that it’s so). In every case, they have some decent level of support. In every case, they’ve flamed out at the national level because they can’t hit critical mass.

But on the other hand, look at Jimmy Carter, Ronald Reagan, and Bill Clinton. All three were viewed early on as completely un-electable. Yet once they passed a certain threshold, the dam broke and they found a huge base of support (well, until Carter actually became President and proved himself an unmitigated disaster).

I believe that if Ron Paul can actually win a primary/caucus or three early on in the race, he’s going to get a really big bounce for it. Historically, the candidate who wins Iowa gets an average 7 point bounce in the New Hampshire polls. At minimum, that’s enough to bounce Paul into a strong second place showing in New Hampshire, given his current poll standings. Depending upon where those 7 points come from, however, it could actually propel him into a neck and neck race with Romney.

If Paul wins Iowa, he doesn’t have to actually win New Hampshire to maintain momentum. A win in Iowa and a very strong second place in New Hampshire suddenly propels him from “second tier” candidate to “top tier.” Note also that the media’s been ignoring him all year. I think many are right that the powers that be don’t want a Ron Paul president, and they’re getting pressure to ignore him. But there are only two kinds of stories the media loves more than heroizing a victorious underdog – a) tearing down a hero and b) making themselves the center of the story. A Paul win in Iowa coupled with a strong second place (or better) standing in New Hampshire suddenly gives them the trifecta – all three stories at once. Ron Paul is the heroized underdog, Romney is the old hero to tear down, and the media’s year long refusal to take Paul seriously becomes their favoritest story of all – navel gazing. Paul’s supporters have been complaining for a year that they’re getting no coverage. If he actually manages to pull of this scenario, they’ll get more than they could ever want.

If a true miracle occurs and Paul manages to win both Iowa and New Hampshire (a real long shot, but I see it as within the realm of possibility), he’s not just top tier, he’s the new front runner – and the entire race changes. Bachman, Santorum, and Hunstman are all dropping out of the race sooner rather than later anyway. Most of their supporters are in the “anybody but Romney” category. If Ron Paul is the “not Romney” who’s making a good showing, he’ll be the next one to get a surge in the vote for it. What’s important to note here is that Paul’s standing in Iowa right now is most decidedly not yet another repeat of this phenomenon, as some are calling it. It’s quite obvious if you just look at the polling trends over the last year. The flash in the pan candidates have all had major spikes at various points. Paul’s numbers, by contrast, have been rising slowly and steadily all year. Add an “anybody but Romney” spike, and if (a big if) Paul can sustain it, and he might actually be able to go head to head with Romney.

At this point, frankly, he’s the only candidate who can. None of the other candidates even managed to get on the ballot in Virginia (yet somehow Gingrich and Perry are “serious” candidates and Paul is not). Rest assured that down the line voters will find this as evidence that they’re not really strong enough candidates. Really, if you can’t even get on the ballot how are you going to defeat Obama? As I already noted, Gingrich is already toast. Newt himself is the only one who doesn’t realize it yet. Bachman, Santorum, and Huntsman are all out after Iowa (New Hampshire at the latest). Contrary to their public protestations, none of them has the money or organization to campaign beyond those states. Perry might stay in it a bit longer, but it’s going to be hard to keep going after he proves that he can’t win Iowa, New Hampshire, or South Carolina (which he will prove). Ron Paul actually has an organization in place this time to build a real campaign, not just an “I’m going to raise some issues” (Ron Paul 2008) or “I’m going to do some shameless self promotion and put myself in the limelight” (Michelle Bachman 2012) run.

With that said, other than Iowa (which I stand behind – Ron Paul will most likely win, and by a larger than expected margin), this is all still a bit of a long shot. I’d give it 20-30% odds of actually happening (50-60% if he actually manages to win New Hampshire and Iowa both). Romney’s got the entire establishment and a shitload of money behind him.

On the other hand, there are a lot of people out there who are really pissed off right now and are looking for some real change in Washington. I think a lot of voters are starting to realize that Ron Paul is the only candidate who offers them any real hope of that at all. The battle he faces, however, is that quite a few people aren’t particularly thrilled about (and many are downright frightened of) the kind of change he offers.

But God, family, and friends watched over us – and hallelujah for that, because Uncle Sam’s Welfare Club sure as hell didn’t. In all that time, the only government help we received, local, state or federal, was about $3000 in Earned Income Tax Credit for tax year 2010. And I can’t tell you how happy we were that it showed up so long after it really would’ve done us the most good.

But I digress. God, family, and friends did watch over us, and with their help we did manage to feed our son, and ourselves, every single day. And now things are picking up. The company I’ve been working part time for this year landed a new contract late in the year. Not only did I get bumped up to full time, but I’m now making 40% more than I did at my last full time job. This was the plan all along (the founders of the company are long time friends and coworkers), but it took longer than expected to get the new contract in place. Still, it did finally happen. Those of you who have missed this blog, well, I miss it too – but I’m happier to be fully employed and paid again, and sometimes that’s the trade you make.

This is the first Christmas in three years that we’ve actually had some spare cash to make it a real Christmas. Maybe we went a little bit overboard for our son, but oh well. He’s 2, he won’t get it. But we feel the joy and celebration, and we’re happy to do it this year. We’re thankful to be where we are, and our thoughts and prayers go out to everyone else out there who’s been hit hard by Great Depression 2.0. Many of you have been hit far, far harder than we have. May God guide you through the tough times as well.

Best of all, we end this year with a new addition to our family. Our baby girl, little Secunda, joined us this week. Despite his young age, Primus has exceeded our highest hopes in how warmly he’s welcomed her into the family. Considering that this hardship for us began with the birth of one child, I can’t think of a more poetic way to bookend it than with the birth of another. Merry Christmas to all, and may you all find the same joy that we have this year.

Shamelessly stolen from Failblog because it’s oh so appropriate to the Game community.

Readers of the original post will recall that Clark’s wife earns between two and three times what he does. On top of that, Clark has a kind of soul sucking job for the state government. Soul sucking enough that when he first started it I told him that if he was still there in 20 years I was going to come kick his ass.

Quite understandably, Clark is starting to get fed up with this situation. Last spring he decided on a totally new career trajectory. This summer he started taking classes toward a new degree at one of the local state universities. Sounds good, right?

Not so fast. Clark’s new “calling” (a word he seems to use completely differently than the Catholics do) requires massive amounts of extra schooling just to break in. There is so little overlap between his current degree and his new interest that he’d have to take enough classes for a bachelor’s degree that it would be almost like starting over completely. Also because of the lack of overlap, he can’t really just jump in and go for a graduate degree. He’d have to take enough pre-requisite undergrad classes that it’s more or less the same. So we’re talking about basically three years of schooling if he went full time.

But did I mention that he’s married and has a daughter less than one year old? If you’re guessing that full time schooling isn’t happening, you’d be exactly right.

Oh, and his new “calling” won’t actually pay any more than he’s currently making. In fact, it might pay less. Now, in some cases that can actually be fine. Recall Roissy’s third commandment of poon: You shall make your mission, not your woman, your priority. If your income is low because you’re truly following a mission or calling, your woman very well might put up with it. In fact, under the right conditions it can be even more alpha than out-earning her.

But there’s a reason that I’ve been putting “calling” in scare quotes. No offense to my friend, but he’s been completely fooling himself here. The day we sat down for lunch and he outlined this plan he gave me some spiel about what his pastor outlined as necessary for a calling. Some mumbo-jumbo about where opportunity, means and desire overlap. Frankly, I think it’s bull. A calling is really simple: it’s what you feel you have to do, even if it’s a royal pain in the ass or nearly impossible. You know, when you’re called. Not when it’s something you maybe might wanna do if only you had the opportunity and means.

I (nicely) told him so, and gently hinted that this was an awful lot of schooling. Then I went home and told my wife that there was no way he’d be finishing it.

I saw Clark a couple of weeks ago and he’d finally acknowledged this truth. Unfortunately, this revelation came after he and his wife moved back to the town where they went to college together so that he could go back to school. She took a faculty job – a sideways move, maybe actually a backwards move in the long term. They’ve spun it to everybody else as if it’s a great career move for her, but he was rather honest with me (at first) about it really being so that he could go to school. Now they’re stuck in a tiny apartment down there, trying desperately to sell their house. Yeah, in this economy. Clark managed to transfer his current state job down there… only now he has a really long commute on top of a soul-sucking, low paying job.

Wait, did I say there was good news here? Well, there is, a little. First, Clark is finally seeming to realize that not all is right in paradise. He hasn’t exactly admitted it to me, but you can see it in his body language and hear it in his voice. His choice of words is letting it out, but only if you know to look. So at least he’s finally starting to see that something is wrong. Also, this move has seriously upset the nice, pretty SWPL life that they had. The net effect of that, at least in the short term, has been to make his wife infinitely more bearable. Some people just really don’t react well to money, and are just better people when they’re not very well off. Sadly she appears to be one of them.

The better piece of news, though, is that he’s looking into other career options. Right now he’s got himself convinced on one path that he probably also won’t stay on. There’s a good bit of schooling there as well, and the program itself is very competitive for admission. But it would result in a terminal degree (not a PhD, but the equivalent in this field) and a salary competitive with his wife’s. I don’t think he’ll stick with this plan, either, but at least he’s now thinking along somewhat more practical lines.

When they moved, I told Hermione that there were very good odds of Clark getting divorce papers in his stocking. Now that they’ve been there a few months, I think he’s got a bit more time left before that comes – but I still think it’s coming. Based on some things he said to me at our last meeting, I think he might even be open to being baby fed some Game concepts.

We shall see.