This post first appeared on Minyanville.

The Obama administration is busy touting the burgeoning success of its mortgage modification program. Unfortunately, it’s a farce: Out of one side of his mouth, the President touts a dedication to the besieged middle class, while from the other, lauds a loan modification program which steals money from struggling homeowners in favor of banks — already the recipients of billions in taxpayer-funded bailouts.

The ploy would be amusingly hypocritical if it weren’t so sad.

According to the Wall Street Journal, the Treasury Department claims that the Home Affordable Modification Program, or HAMP, has begun more than 650,000 so-called “trial modifications” since its inception this February. The commonplace explanation for the latest in a host of failed mortgage modification schemes is that it’s a natural first step to getting struggling borrowers back on the regular monthly payment track.

HAMP mandates that in order to qualify for a permanent loan modification, borrowers must first complete a trial period of three months with lower payments, in addition to submitting the proper documentation required for a more permanent solution. On the surface, this seems logical, even fair: Only after a show of good faith should homeowners be allowed a second chance.

Lenders like Wells Fargo (WFC), Bank of America (BAC), JPMorgan Chase (JPM), and Citibank (C), however, are required to show no similar evidence of good faith.

And I’ve yet to read a news story that accurately describes how this program works: Even as banks ask borrowers to cough up monthly payments on a house that’s likely to be hopelessly underwater, the foreclosure process continues.

Notices of default turn into notices of trustee sale, which turn into trustee sales, which turn into repossessions and eventually evictions. Meanwhile, as the homeowner is given a false sense of security that scraping together payments each month could save his house, lenders are under no obligation to grant a stay of foreclosure.

In other words, banks determined to take a loan through the foreclosure process can easily — and with Washington’s blessing — grant a trial modification which allows them to pinch a final three months of payments from homeowners already on the verge of financial insolvency, while offering nothing more than an empty promise in return.

To be sure, many of these homeowners got themselves in over their heads by overextending their debt load on an overpriced home. Foreclosure, in some cases, is a reasonable solution.

But an initiative touted as a long-awaited success in the battle against foreclosures is in fact just another way for Washington to redirect money from the pockets of ordinary Americans — however economically downtrodden — to big banks surviving solely by suckling the government teat.

By ANDREW JEFFERY

This post first appeared on Minyanville.

The horses, pigs, cows, goats, sheep, llamas, ostriches, dromedaries and rhinos have all left the barn, yet the US Securities and Exchange Commission (SEC) still thinks it should be minding the door.

In light of its woeful inability to perform even the simplest of tasks — like making sure the biggest hedge fund in the world, I don’t know, makes a trade once every 13 years — the Obama administration is looking to strip the SEC of certain regulatory responsibilities.

And rightly so.

According to Bloomberg, plans could be announced as early as next week outlining just how watered down the SEC’s role in the new Obama regulatory regime could be. It’s expected the Federal Reserve may take over the SEC’s oversight of firms deemed “too big to fail.” Keeping tabs on mutual-fund operations could become the domain of certain banking regulators.

The SEC, for its part, under the new leadership of 20-year veteran of the agency, Mary Schapiro, is fighting back. Shapiro says she’s frustrated the SEC isn’t more involved in high-level negotiations with financial firms like Citigroup (C), Bank of America (BAC) and Goldman Sachs (GS), and is making great strides in repairing the regulator’s tattered image.

Commendable, but too little too late.

The SEC is widely viewed as having committed the biggest regulatory bonk in modern financial history, turning a blind eye to Bernie Madoff’s $65 billion Ponzi scheme, and failing to, even in the remotest way, protect investors from the implosion of the market for mortgage-backed securities and other structured financial products stemming from rampant fraud, scant disclosure and blatant conflicts of interest.

Oh, and just days before Bear Stearns collapsed into the waiting arms of JPMorgan Chase (JPM), then SEC Chairman Chris Cox went on national television, assuring the country Bear was in good shape. Oops.

The SEC is a case study in regulation gone bad. It’s one thing to have openly unregulated markets, where participants understand there’s no one guarding the hen house. But when markets are purportedly policed by a powerful government body, investors assume some level of basic integrity and honesty.

By violating this trust, the SEC proved that weak regulation — and more specifically, weak regulators — do more harm than any amount of deregulation could ever do.

The looming restructuring of the financial regulatory complex will be a messy, political, imperfect process. But if the first step is dismantling the SEC’s web of incompetence, then we’re off on the right foot.

By ANDREW JEFFERY

This post first appeared on Minyanville.

In its ongoing attempt to rewrite the rules of what’s quickly becoming our quasi-capitalist nation, the Obama Administration is weighing options that would expand compensation restrictions to all corners of the financial-services industry.

According to the New York Times, well-publicized efforts to rein in executive pay at firms that accepted TARP money could extend to companies that have thus far stayed off the government dole. In other words, the spottily regulated world of hedge funds and private equity could be subject to some of the same restrictions faced by their government-subsidized competitors.

However unpleasant, firms like Citigroup (C) and Bank of America (BAC) (both in hock to the US taxpayer for hundreds of billions of dollars) have lost their right to be the masters of their own executive compensation destiny. On the other hand, pay at hedge funds that haven’t touched a penny of government money should be determined by the firms themselves.

Since he took office, President Obama has been a loud advocate for pay that’s closely tied to performance. The prevailing view in Washington is that Wall Street traders were able to take on massive risk — either their firm’s or their clients’ — without feeling much pain if the bets went sideways. This led to excessive risk-taking, and the kind of near-criminal alchemy that ultimately blew up the financial lab.

And while this is true to an extent, the result of this typical government overreaction will be a system reduction of risk – and by extension, of reward. Financiers, entrepreneurs and businesspeople of all types engage in risky behavior every day – which is what keeps the economy humming.

Systematically reduce the incentive to take risks, and economic output will slow. It’s simple math.

Already, even as Washington bumbles its way towards legislation on executive pay, what’s left of the free market is sorting things out on its own.

Raising capital is well-nigh impossible for upstart hedge funds, as even management teams with strong credentials are struggling to get off the ground. Existing funds, most of which remain below their so-called “high-water mark” (the level at which juicy performance incentive fees kick in), won’t see big bonus payouts until well into 2010.

This is the market at work, punishing bad actors — even ones that were just marginally bad — and creating an environment where only the most astute, talented, and driven can succeed.

By contrast, as policymakers look to make up for years of ignoring their fiduciary responsibility to safeguard the public interest, we’re witnessing the development of an economic system that benefits only the most well-connected.

Needless to say, this is an unwelcome progression.

By ANDREW JEFFERY

This post first appeared on Minyanville.

Every month, it seems, Washington dreams up new and fantastic ways to funnel taxpayer money towards a growing list of undeserving recipients.

Now, in the latest attempt to coerce banks into modifying delinquent mortgages en masse, the Treasury Department plans to offer cash incentives to lenders who lower interest rates or forgive principal on second liens (so-called “piggyback” loans). According to Bloomberg, the new program aims to simplify the modification process and help struggling borrowers avoid foreclosure.

The subprime second lien was a highly profitable, nearly usurious loan product that proliferated during the housing boom. Once reserved for high-quality borrowers and those with sufficient equity in their homes, seconds became an easy way to jam borrowers into homes they couldn’t otherwise afford.

If a homeowner wants to take out a first mortgage for more than 80% of the home’s value, he or she is typically required to take out mortgage insurance, issued by firms like Radian (RDN), MGIC Investment Corp (MTG) and the PMI Group (PMI). For years, the cost of insurance — plus the required down payment — limited home ownership to those who, by and large, could afford to buy responsibly.

But as housing demand ballooned from 2002 to 2005, banks discovered they could just loan borrowers the down-payment money – and charge a hefty fee to do so. Without those pesky requirements — and by bypassing the sometimes strict credit guidelines of mortgage insurers — banks were able to open up their loan products to a whole new group of unqualified borrowers.

Second liens, by virtue of being subordinate to first liens, carry additional risk, and thus a higher interest rate. In other words, if a borrower defaults, the holder of the second lien has to wait until the first mortgage holder is made whole before getting paid.

And since seconds carried super-high interest rates, securities backed by this type of loan offered juicy returns for investors. It should come as no surprise that the second-lien market was dominated by Bear Stearns (now JPMorgan (JPM)), Countrywide (now Bank of America (BAC)), and Citigroup (C) (now in hock to Uncle Sam for a cool $300 million).

Now, the Obama Administration wants to give billions to not only the banks who wrote these loans, but the borrowers who accepted them. The program is destined for failure.

In fact, it’s already failed.

A little over a year ago, Fannie Mae (FNM) and Freddie Mac (FRE) introduced an initiative called the “HomeSaver Advance.” Under the program, borrowers behind on their mortgage payments could take out an unsecured line of credit to get current. Under this program, Fannie and Freddie lent out $462 million over the course of the next 12 months.

Now, based on current market prices, the loans are worth a whopping $8 million, or $0.017 cents on the dollar. Talk about throwing good money after bad.

The President’s initiative to modify seconds is no different: It takes a situation destined for foreclosure and simply prolongs the agony. This prevents the borrower from getting out from under his mountain of debt and starting anew. Meanwhile, homes become ever more dilapidated, and banks further delay their own days of reckoning.

The rationale for this program is obscure – though it does provide yet another way to hand taxpayer money over to the very banks who got us into this mess in the first place.

The month of March brought a degree of chaos to the financial markets, and indeed to the country as a whole, not seen in, well, months.

The stock market culminated another wave of selling with multi-decade lows, only to rebound in the strongest counter-trend rally since the bear market began last year. The AIG bonus scandal whipped the media, the public and Congress into a frenzy. General Motors lost its CEO at the hand of the President and we learned about Washington’s (latest) last ditch effort to save the financial system.

Meanwhile, the housing market gave investors and homeowners alike a ray of hope: A pop in February’s new and existing home sales. Optimistic pundits declared the housing market’s bottom just months away, while prices stubbornly maintained their distinctly southward trend.

Most economists use these broad trends to “predict” how far home prices will fall and when we’ll ultimately bottom. Data on the national level, however, just isn’t useful to most people. After all, whether you’re buying your first home or plunking down your savings on an investment property, the most important house is the one you’re buying, not some statistical collection of millions of unique properties.

This month’s Chart of the Month illustrates how thoughtful analysis can be used to identify trends the widely quoted data overlook. Prices for smaller homes on the Peninsula peaked first in late 2006 and have slid steadily ever since. Bigger houses, on the other hand, held up better but have fallen almost as far in half the time. This mirrors the trend that Prime mortgages are now souring faster than subprime.

In the coming months, we’ll be watching closely to see if any of these groupings bucks the prevailing trend — will the first group to crack be the first to bottom? Or will the high end’s fall be short and sweet?

This post first appeared on Minyanville.

It’s starting to make economic sense to go green.

Last summer, with gas prices topping $4 per gallon and commodities of all kinds becoming more expensive, renewable energy advocates thought their day in sun — so to speak — had finally arrived.

Investors flocked to industry leaders like First Solar (FSLR) and SunPower (SPWRA), whose stocks leapt to new highs. On July 8, 2008, renowned investor T. Boone Pickens announced an ambitious plan to wean America off its dependence on foreign oil. Later that week, crude touched an all-time high of $147.02 per barrel.

Since then, oil — along the rest of the commodity complex — has plunged, dashing hopes that renewable energy would soon be as cheap, if not cheaper, than traditional, dirty fossil fuels. But now, with the economy in free fall and Washington scrambling to boost productivity, renewable energy has been taken off life support.

Part of the recently passed $797 billion economic stimulus package gives incentives to homeowners to adopt energy-saving appliances, solar panels and other eco-friendly add-ons. Increased tax credits for qualifying expenditures can reduce tax bills by thousands of dollars a year. The catch (and there’s always a catch when the government is involved): Benefits only arrive if you shell out big bucks for pricey green gear.

Tax credits are applicable on new expenditures, and since solar-panel systems run in the tens of thousands of dollars, the 30% tax credit isn’t exactly like socking money away in the bank. Still, green construction firms and solar panel installation outfits like Akeena Solar (AKNS) are eager snatch up new business.

Before the credit crunch and the ensuing financial meltdown, Akeena had actually partnered with Comerica Bank (CMA) to offer low interest loans for buyers of new solar-energy systems, a portion of which could be backed by the value of the home. Since monthly loan payments were easier to stomach than plunking down cash to buy a new system, these new lending programs could have made solar available to the masses.

But now that home values have plummeted and lenders are reticent to part with their precious dollars, such borrowing programs are nearly impossible to find. Still, for those homeowners intrepid enough to take the plunge, tax credits offer an attractive reason to get off the green fence.

While solar power isn’t as economically efficient as traditional electricity sources, the more money that’s pumped into new technologies — even if it’s through a combination of private and public investment — the sooner we’re likely to reach the parity solar advocates have been promising for decades.

And the sooner that happens, the better.

By AUSTIN NELSON

There is considerable controversy as to the wisdom of the new measures introduced by the Obama Administration to stabilize the housing market: Will they work? What does it even mean for something like this to work?

While there are strong arguments on both sides, let’s look specifically at who Obama’s plan will definitely help and how that could in turn help the economy.

According to the White House’s official release on the Homeowner Affordability and Stability Plan (HASP), upwards of 9 million homeowners will be helped in their struggle to stay afloat. Even assuming that the administration is inflating these numbers a little, that’s still a lot of families. Each of these families could potentially be given a lifeline, a way to stave off the foreclosure of their homes.

In a plan estimated to cost $275 billion, HASP aims to achieve the lofty goal of slowing foreclosures by:

1.Reducing and subsidizing monthly payments for troubled borrowers
2.Incentivizing servicers and banks to modify loans
3.Instituting clear and consistent guidelines for loan modifications

The argument has been made that the plan rewards those who made poor financial decisions at the expense of those who did not. In some ways, this is true, but there could be effects of these measures beyond the families who are directly helped.

Most importantly, slowing foreclosures can prevent the downward spiral of home values that results when a number of homes get foreclosed within a single neighborhood. In fact, the White House claims that “the average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 dollars.” While the exact modeling used to figure out such a specific number is unclear, the fact remains that preventing foreclosures will stabilize prices, particularly in neighborhoods with high rates of foreclosure.

Notice that I said that staving off foreclosures will STABILIZE prices, not that it would put an end to price declines. The underlying forces involved in the current home price correction go well beyond foreclosure activity. Prices will correct—indeed they must correct before the economy improves–and no foreclosure prevention plan can stop those fundamentals. The key is to make sure that the market doesn’t over-correct and cause unnecessary damage to the economy as a whole.

In a pattern we here at Cirios have seen many times over, a flood of foreclosures can cripple a neighborhood in a matter of weeks. The greatly increased supply caused by newly foreclosed properties coming onto the market results in price declines in the entire neighborhood. Additionally, foreclosed homes often sit on the market for months, largely because they are improperly priced and the bureaucracy involved in their sale is staggering. While on the market, these homes gradually fall into disrepair, decreasing the value of every home on the block simply by their ugly presence. The resulting decrease in home values leads to more homeowners going underwater and in turn even more foreclosures. And the spiral continues, feeding back on itself. By slowing the flow of foreclosures, it is theoretically possible to stabilize this cycle and remove the feedback mechanism.

The bubble that formed from 2001-2006 in the residential real estate market was unprecedented in its scope and magnitude. At the national level, median home prices climbed to more than 30% beyond historical trends. In many areas that number was twice that much.

As you can see in the graph below, a previous bubble (blue arrow) in the late 1980s (a time period where prices climbed above historic trends) was followed by a prolonged trough (red arrow) where prices fell below the trend. The same could be said for the late 1970s, but the bubble was much less severe.

In fact, the size of these “bubbles” and the length of following “troughs” have increased substantially. If the same pattern were to follow the currently deflating bubble, we should expect to see a trough that lasts on the order of fifteen years. With the current plummeting trajectory of home prices, that trough could be even deeper than the historical pattern would predict.

Source: Economagic, analysis by Cirios Real Estate

On the right side of the graph, I’ve placed a few projections of trajectories for housing prices. One represents a deep trough, which would result from a large “overshoot” in housing price declines. The other represents a “soft landing” for home prices which could result from breaking the foreclosure spiral. Note that the difference between the two projections is two-fold: depth and duration.

In other words, how bad will it get and for how long.

The variance between the trajectories is a 12% difference in low price and a five year lag in home prices’ return to historical trends. In the interest of scientific rigor, I have to say that there is no factual basis for either one of these scenarios. I have not run any models or even evaluated any data in a quantifiable way. But what I am trying to show is that the difference between a scenario where the foreclosure fueled home price spiral continues and one where it is attenuated could have drastic consequences for real estate markets and the economy as a whole.

Our fictional 12% difference in home price means well over $1 Trillion dollars in lost home equity. A five year lag in housing recovery means five more years of expensive and destructive foreclosures. The drag that both of these factors would place on the economy would certainly slow any eventual economic recovery we could hope for.

Only time will tell if HASP will have the desired effect on the housing market. As I’ve said, it certainly won’t be a magic bullet to “solve” the economic problems that currently face us. At best it only addresses a symptom and not the disease. But spiraling home prices are a symptom that we cannot afford to ignore. That HASP simultaneously provides a positive solution to a lingering problem while directly helping millions of families most strongly affected by the economic downturn is reason for praise.

That it helps a select few more directly than others is unarguable, but the overall effect on the housing market and the economy should be positive. Whether it is the best possible plan or merely the result of political expedience is a matter for debate, as are the moral implications that such a socialistic policy represents. But now is the time for action, and this plan strikes a powerful blow.

By ANDREW JEFFERY

This post first appeared on Minyanville.

While pundits and politicians debate the various aspects of President Obama’s $275 billion housing bailout, one piece of data proves just how misguided federal efforts to revitalize the housing market are: $275 billion could buy more than half of all American homes already in foreclosure.

Such an undertaking would remove distressed homes from the market and spur community revitalization efforts throughout areas desperately in need of the hope they were promised in November.

According to real-estate analytics website Realtytrac.com, foreclosures were filed on 2,330,483 homes in 2008, up 83% from the year before. The median home price in the US is $180,100 - which means 1,526,929 of those homes could be bought with $275 billion. And since foreclosures are centered primarily in areas with low home values, the true number of properties the bailout money could be used to buy is likely much higher.

While the logistics for such an outrageously common-sense solution to the nation’s housing woes are daunting, they’re no less challenging than the massive loan modification efforts already in place. And their results continue to prove underwhelming, at best.

Such a solution also addresses the rapidly mounting discontent over bailing out those homeowners who made bad decisions. Distressed borrowers wouldn’t directly receive any taxpayer money – though they would indirectly benefit from the massive government expenditure in their community.

Cash would be funneled down to the local level, where cities and counties could more effectively distribute it. To be sure, local governments can be as bureaucratic and inefficient as Washington — not to say corrupt – but by allocating capital to localities, each community would be responsible for its own clean-up efforts.

Private investors, developers, nonprofits and real-estate professionals could compete for business, adding a free-market component to rescue efforts – and even spurring a little sorely-needed economic activity.

Some cities aren’t content to wait for federal money to trickle down from the White House. Menlo Park, California, best known for its devotion to the bubble lifestyle, is considering using city money to buy and refurbish foreclosed homes.

The town, like many others in America, is split by a highway that acts as a major dividing line between the haves and the have-nots. While there are just 97 homes in foreclosure in Menlo Park, the vast majority are on “the other side of the tracks,” away from the mansions and quiet, tree-lined streets of West Menlo. The proposal will use money from a $2 million fund already seeded by developers who opted not to allocate units for low-income housing.

The city plans to tap Habitat for Humanity to refurbish the homes, using community volunteers and local experts to oversee the improvements. The president of the local Homeowners Association, Ash Vasudeva, said “When rehabilitation is going on, it uplifts the entire community.” A simple statement, but true.

And while this is one small city undertaking one small project, it could serve as a model for other communities around the country. Not to mention the fact that the mere announcement of $275 billion in real-estate investments would hasten the price discovery the housing market so sorely needs.

Furthermore, banks stand to gain little from such a use of public funds – which could be why such a plan has yet to be proposed on Capitol Hill. When a bank forecloses on a home, JPMorgan Chase (JPM), Wells Fargo (WFC) or Citigroup (C) is forced to write the asset down to at least the amount of the outstanding loan. But since most properties are worth far less than the loan amount, selling the property at market prices would require further writedowns.

So, as banks soak up billions in bailout money under the auspices of massive loan modification efforts aimed at stemming foreclosures, vacant homes lay in disrepair, vagrants loot the pipes – and communities continue to deteriorate.

But instead of allocating funds for such grassroots efforts, Washington continues to issue broad, vague orders aimed at helping many, but in very small amounts. Such programs have failed before, and they’ll fail again.

Maybe it’s time for a new approach.

By ANDREW JEFFERY

This post first appeared on Minyanville.

Washington just doesn’t get it: We don’t want more debt.

While congressmen berating bank CEOs for their unwillingness to lend out their bailout money makes for a nice media clip, it reflects the growing disconnect between our elected officials and any semblance of reality. Not that the relationship was ever particularly close – but lawmakers are floundering for good press while the nation’s economic future slips further and further from their tenuous grasp.

Bloomberg reports American consumers are wary of taking on more debt, as expectations about eroding economic conditions are forcing people, to *gasp* make responsible decisions about their personal finances.

Bloomberg cites Midsouth Bancorp (MSL) president C.R “Rusty” Cloutier, who says that, despite aggressive marketing, town hall meetings, and $20 million in TARP money, Midsouth’s customers just aren’t taking out new loans.

This is the rejection of debt Professor Depew speaks of when discussing the structural deflation we’re currently experiencing.

Credit is based on trust. And while conventionally we view this relationship as one in which the lender must trust the borrower to repay his debt — at least to an extent that’s commensurate with the interest rate — it does go both ways.

As lenders like Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC) are increasingly being painted as corporate marauders out to rape and pillage the American public, would-be borrowers are wary of putting their financial future in the hands of these men of questionable repute. And with credit-card companies rushing to alter terms, it’s no surprise consumers are reluctant to extend themselves further.

Still, lawmakers are pushing through an economic stimulus package that depends, in part, on a willingness on the part of consumers to keep spending. Their delusion is only outmatched by their hubris – the belief that a bunch of self-interested politicos can coerce the average American into making ruinous financial decisions for the betterment of the country.

Floundering industries — notably automakers and homebuilders — are counting on government subsidies to encourage Americans to keep borrowing to buy their products. But what General Motors (GM), Ford (F), Centex (CTX) and KB Homes (KBH) don’t understand is this: We just don’t want what they’re peddling. And we certainly don’t want to borrow against it.

The transition from a debt-dependent, credit-drunk consumerist society won’t be immediate: It’s taken 18 months of financial panic for evidence of the shifting social mood to make its way into the mainstream.

But as the economic outlook continues to darken, the country becomes more disenfranchised, and the government grows ever-more addicted to sound bites and empty promises, reality will set in.

For the past 20 years, we’ve been blithely driving along an economic road that ends in a cliff. And that cliff is now in our rear-view mirror. We’re tumbling, groping for any branch that can save us from the fall. But each one of these new government programs, bailouts and rescues simply tries to set us gently back on the road from which we only just plummeted.

We already know where that path ends, and it ain’t pretty. What say we try another road?

By ANDREW JEFFERY

This post first appeared on Minyanville.

The answer? An emphatic no. This is simply the latest example of legal plunder perpetrated by the federal government against law-abiding, tax-paying citizens.

The Obama administration’s scheme to help troubled borrowers centers on subsidizing interest payments, which would help borrowers make ends meet without angering those investors expecting full payments each month. This marks the first time the government is intervening directly with taxpayer funds to ease the burden of monthly mortgage payments.

Bloomberg reports the plan will be voluntary for lenders like Wells Fargo (WFC), Citigroup (C) and Bank of America (BAC), and will employ many of the tactics previous modification efforts have used (ineffectively), such as loan extensions and principal reductions. Modifications identified as having a net present value will be targeted, where foreclosing would be more expensive than changing the loan terms.

The program aims to establish a standard for loan modifications that can be used industry-wide. That’s an absurd claim, which demonstrates the extent to which lawmakers misunderstand the scope of the problem. It’s a bit like saying every American must cut their hair the same way: It would be laughable it weren’t so sad.

Each mortgage, each borrower, each lender, each home is unique; each situation is different. Individual banks can barely standardize the documents required to close a loan, so the notion that there can be one standard for approving a loan modification — an intensely complicated procedure involving countless interested parties — is ridiculous.

It would be one thing if the plan offered even the remotest possibility of stabilizing the housing market. It doesn’t. The few borrowers who may be helped will have little effect on a massive, disjointed housing market that remains determined to run its course despite government efforts to stop the bleeding.

The societal implications of this program are downright frightening.

Washington cutting checks to borrowers who can’t make their mortgage payments sounds like a benevolent act attempt to reach down to struggling families — and in some cases, it may certainly help. But it also fosters dependency on the federal government and incentivizes bad behavior.

It now appears we’ve reached a point in this crisis where differentiating between those worthy of help and those left to pick up the tab is determined primarily by how poorly one managed their personal finances. The worse the decision, the greater the federal assistance – and it’s true for government bailouts of bad choices on the part of individuals and institutions alike.

The message this sends to the rest of us – those who are still living up to their obligations and trying in good faith to eke out a living during tough times: Throw in the towel.