The case for foreclosures.

How the dismal science applies to your life.
March 3 2008 12:48 PM

The Case for Foreclosures

One family's sorrow is another's joy.

Foreclosed homes for sale
Foreclosed homes for sale

If you're facing foreclosure, Treasury Secretary Henry Paulson wants to help. "If someone is willing to make a call to reach out," says Paulson, "there's a chance we can save their homes." But Paulson can't save these homes because the homes are not endangered in the first place. They stand to change hands, not to vanish.

None of these foreclosed houses is going to disappear. After a foreclosure, one family moves out, and another moves in. We see the sad faces of the people moving out, but we don't as often see the happy faces of the new homeowners moving in. Nevertheless, those happy faces are out there, and we should not discount them.

Advertisement

That's important, and it's important in a larger context. Often when it comes to economic policy, some effects—in this case, the genuinely moving stories of good people who can't afford to live where they've been living—are highly visible, while others—the genuinely moving stories of good people who can now achieve their dreams of home ownership—are less well-publicized. That doesn't make them any less real.

I predict with great confidence that when I say that foreclosures create new homeowners, a sizable chunk of my readers will scoff that "the people who can afford them would have been able to afford nice homes anyway." I could use economics to explain why those readers are mistaken (a glut of homes on the market leads to falling prices, etc.), but that's unnecessarily complicated. All it takes is the simple observation that there cannot be more homeowners than there are homes, and if one home becomes vacant, then there can be one new homeowner. Call it the law of conservation of homes.

That's one reason to temper your distress over strangers suffering foreclosure. Here's another: If you get to live in a nice home for a few years and then lose it to foreclosure, you are not worse off than someone who never got to live in a nice home in the first place. If the Treasury Department is looking for ways to help people, it would be nice to focus on the people who are most in need of help.

Losing your house is painful. Never having anything to lose is even more painful.  How do the feds justify spending money—and, rest assured, any program to stop foreclosures will cost money—to help struggling homeowners instead of, say, the struggling homeless? Or, for that matter, a child starving in Africa? There is room for a lot of legitimate debate about how much we should be taxed to help the less fortunate. But whatever level of assistance we agree on, I'd like to see it targeted to those who genuinely are less fortunate.

There's at least one more reason to regret Secretary Paulson's eagerness to forestall foreclosures: If banks can't enforce contracts (or even if they "voluntarily" forgo the enforcement of contracts under pressure from the Treasury Department), they will undoubtedly be more reluctant to make loans in the future. Rest assured that somewhere out there—invisible to you and me but nonetheless real—is a young couple who, thanks to this intervention, won't be able to get the mortgage they want next year.

I predict with equal confidence that a sizable chunk of readers will attribute my observations to a failure of compassion. But which is more compassionate: to care about the fortunes of the people who happen to be in your field of vision or also to include those whom you cannot see? The homeless are out there. The starving children in Africa are out there. The would-be new homeowners are out there. Each of them, in different ways, stands to gain or to lose from the policy choices we make. To exclude them from consideration—just because they happen to be absent from the front page of this morning's newspaper—is not a compassionate enterprise.

TODAY IN SLATE

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Two Damn Good, Very Different Movies About Soldiers Returning From War

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

Students Aren’t Going to College Football Games as Much Anymore, and Schools Are Getting Worried

The Good Wife Is Cynical, Thrilling, and Grown-Up. It’s Also TV’s Best Drama.

  News & Politics
Weigel
Sept. 20 2014 11:13 AM -30-
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 20 2014 1:52 PM Julian Casablancas’ New Album Sounds Like the Furthest Thing From the Strokes
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.