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[bob ford <bobford79 AT yahoo.com>]

Peter Schiff is credited calling this econnomic crash about a year & 1/2 ago 
, wrote abook called "Crashproof".  This is his editorial.  I copied/pasted 
the whole editorial, but there is a link to the source
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Just stop paying your mortgage

By Peter Schiff 
October 10, 2008 

If you are a mortgage holder who is either struggling with crushing payments, 
bitter for having overpaid for your home during the bubble, or who has 
extravagantly refinanced when prices were rising, the government's landmark 
$700 billion bailout package has an important message for you: stop making 
your mortgage payments . . . immediately. Furthermore, if you believe that 
with some planning and sacrifice you may be able to meet your mortgage 
obligations, the government's message is clear: relax, don't bother. 

While angry voters have labeled the package as a bailout for Wall Street, it 
is more akin to a “Get out of Jail Free” card for anyone who acted 
irresponsibly during the boom. Here's why. 

Nobody likes foreclosure, least of all politicians. The new law clearly 
indicates that the government will make major efforts to reduce foreclosures 
through “term extensions, rate reductions and principal write-downs” of the 
troubled mortgages that it buys from the private sector. In other words, your 
new landlord will bend over backward to keep you in your home. The 
legislation telegraphs this by including a provision that extends until 2013 
the exclusion of loan reductions from taxable income. 

When a financial institution holds a mortgage, homeowners must live with the 
fear of foreclosure. Private institutions only have obligations to 
shareholders. In the case of a defaulting borrower, they will look to recover 
as much of their principal as possible. If foreclosure is their best option, 
they will take it in a heartbeat. 

The government has no such obligations. Its only goal is to keep voters 
happy. After supposedly bailing out the fat cats on Wall Street, no 
politician wants to be accused of evicting struggling families. Once you 
understand this, all of your anxiety should melt away. Why pay your mortgage 
if foreclosure is off the table, and if you know that lower payments, and 
possibly a reduced loan amount, would result? A tarnished a credit rating is 
a small price to pay for such a benefit. 

Unfortunately, this boon will not extend to those foolish individuals who 
either made large down payments or resisted the temptation of cashing out 
equity. The large amount of home equity built up by these suckers, I mean 
homeowners, means that in the case of default foreclosure remains a 
financially attractive option. As a result, these loans will be much less 
likely to be turned over to the government. 

If your mortgage does become the property of Uncle Sam, the growingly popular 
impulse to “just walk away” should be replaced by “just stay and stop 
paying.” No one will throw you out. After a few months, or years, of living 
payment free, you will get a call from a motivated government agent eager to 
adjust your loan into something affordable. 

To bolster your bargaining position it will help to be able to claim poverty. 
As a result, if you have any savings, spend it soon, before they call. Buy a 
bigger TV, a new wardrobe, or better yet, take a vacation. After the hardship 
of spending all of your refi cash, you probably deserve it. If you have any 
guilt just remember, Washington argues that consumer spending is the best way 
to stimulate the economy. Living beyond your means is a patriotic duty. 

If you do get the opportunity to live for a while with no mortgage payment, 
don't make the tragic mistake of using your extra cash to pay down your 
credit cards. As the growing level of credit card defaults will soon push 
credit card companies into bankruptcy, we can expect a similar bailout plan 
for American Express and Discover Financial. When that happens, expect 
massive balance reductions for Americans who can demonstrate the inability to 
pay. The bigger your balance, the greater the benefit. 

Taxpayers, however, will not be so lucky. The savvy investment strategists 
who see the government turning a tidy profit on its mortgage purchases have 
not factored in the incentives that will discourage nonpayment. The only way 
the government will be able to profit would be to buy the mortgages at deep 
discounts to actual loan values. However, if the purchase prices are too low, 
the plan will bankrupt the institutions it is trying to bail out. On the 
other hand, if it substantially overpays, which seems far more likely, it 
will bankrupt the nation. 

In any event, as more and more borrowers succumb to the allure and safety of 
nonpayment, look for the number of troubled assets to swell. This will ensure 
that the $700 billion merely represents the first installment in what will be 
a multitrillion-dollar plan. Just as government policies provided the primary 
impetus in blowing up the housing bubble earlier in the decade, its latest 
attempt at market manipulation will only result in making a terrible problem 
far worse. 



--------------------------------------------------------------------------------

 Schiff is president of Euro Pacific Capital and author of “The Little Book 
of Bull Moves in Bear Markets.” 


http://www.signonsandiego.com/uniontrib/20081010/news_lz1e10schiff.html