Help homeowners, FDIC chief says
This morning, I woke to the headline on cnn.com, "Help homeowners, FDIC chief says." Here's a novel thought: No. Don't help homeowners.
I'm not an economist; helping homeowners may in fact help the economy, but in a moral sense, and from a classical conditioning standpoint, I think helping the majority of homeowners in foreclosure is not the right thing to do. We shouldn't bail out homeowners who took out bad mortgages because it reinforces bad behavior.
Let's think for a second about an alternate scenario: Let's say this crisis centered around automobiles. For years banks had seen fit to write car loans to people who can't afford them, allowing Heywood Jablome making $25,000 a year to buy a Ferrari with some sort of adjustable rate, or interest only payments auto loan. When the rate adjusts and Heywood can't make the payments, it would be ludicrous to suggest that the government should bail him out to keep his Ferrari from being repossessed. Everyone would readily say, "Heywood doesn't need a Ferrari. Heywood outspent his means and needs to learn his lesson by getting his Ferrari repo'ed, taking the bus for a while, and eventually getting himself a Chevy Cavalier, and getting on with his life."
The comeback seems to be of the form, 'But these aren't people's cars, these are their HOMES, where they LIVE, their biggest INVESTMENT.' A few observations: Many people rent. There's no shame in it. If you could afford to buy a home way out of your league with a bullshit loan, you should be able to find a modest apartment to rent for slightly less money somewhere. This is basically how the housing market works -- you strive for ownership, but you rent until you get there. Secondly, as a society, we don't hold out much sympathy for people who make bad investments. Sure, we try to clamp down on investment scams that prey upon the elderly, and we try to arrest forthright criminals and con men, but people make losing investments every day. My investment portfolio is my biggest asset, and it's in the TOILET this year; can I have a government bailout too?
Why do we reward bad behavior? Worse yet, why take on policies that effectively punish good behavior? Where is the assistance or tax break or whatever for people who DIDN'T overspend their means? Do we expect their feeling of superiority derived from merely avoiding financial ruin to keep them warm at night? Instead, we approve a series of giant federally funded bailouts that, according to some pundits, would equate to a half year tax holiday for every citizen in the country if applied as a tax credit. Think about that for a second: Next year, all the taxes you pay from January through June are being used to reward bad behavior.
If you're not outraged, you're clearly not paying attention.
I'm not an economist; helping homeowners may in fact help the economy, but in a moral sense, and from a classical conditioning standpoint, I think helping the majority of homeowners in foreclosure is not the right thing to do. We shouldn't bail out homeowners who took out bad mortgages because it reinforces bad behavior.
Let's think for a second about an alternate scenario: Let's say this crisis centered around automobiles. For years banks had seen fit to write car loans to people who can't afford them, allowing Heywood Jablome making $25,000 a year to buy a Ferrari with some sort of adjustable rate, or interest only payments auto loan. When the rate adjusts and Heywood can't make the payments, it would be ludicrous to suggest that the government should bail him out to keep his Ferrari from being repossessed. Everyone would readily say, "Heywood doesn't need a Ferrari. Heywood outspent his means and needs to learn his lesson by getting his Ferrari repo'ed, taking the bus for a while, and eventually getting himself a Chevy Cavalier, and getting on with his life."
The comeback seems to be of the form, 'But these aren't people's cars, these are their HOMES, where they LIVE, their biggest INVESTMENT.' A few observations: Many people rent. There's no shame in it. If you could afford to buy a home way out of your league with a bullshit loan, you should be able to find a modest apartment to rent for slightly less money somewhere. This is basically how the housing market works -- you strive for ownership, but you rent until you get there. Secondly, as a society, we don't hold out much sympathy for people who make bad investments. Sure, we try to clamp down on investment scams that prey upon the elderly, and we try to arrest forthright criminals and con men, but people make losing investments every day. My investment portfolio is my biggest asset, and it's in the TOILET this year; can I have a government bailout too?
Why do we reward bad behavior? Worse yet, why take on policies that effectively punish good behavior? Where is the assistance or tax break or whatever for people who DIDN'T overspend their means? Do we expect their feeling of superiority derived from merely avoiding financial ruin to keep them warm at night? Instead, we approve a series of giant federally funded bailouts that, according to some pundits, would equate to a half year tax holiday for every citizen in the country if applied as a tax credit. Think about that for a second: Next year, all the taxes you pay from January through June are being used to reward bad behavior.
If you're not outraged, you're clearly not paying attention.