Feel-Good Policies that Wreak Havoc in the Long Run
Recent calls to bail out homeowners who got in over their heads have raised not only red flags, but anger, among fiscally responsible Americans. Although politicians will use “feel-good” speeches to show they care about the poor person who is losing their home “through no fault of their own,” anyone who has been following the housing crisis for the last few years knows that most of this was preventable, and most of it motivated by greed and an irrational belief that house prices would just continue to go up.
Upton Sinclair was certainly right when he said, in effect, that you can’t make people believe something if their jobs depend on not believing in it – certainly an apt description of the REIC (real estate agents being some of the worst offenders and mortgage brokers the enablers).
Homeowners had to believe prices would continue to appreciate, against all reason, or they would be in deep trouble. Certainly those who get in at the top of a pyramid scheme are guaranteed to lose. Those who got in and got out soon enough lined their pocket with the largesse of what was a totally preventable asset bubble.
It is particularly poignant to think of the 2 million more Americans who lost their health insurance last month while listening to Congress whine about 2 million Americans possibly losing their homes. They can rent. If you don’t have health insurance the financial implications are far worse than being “forced” to rent instead of own a place to live.
The vast majority of people in trouble with their mortgages bought more than they can afford (or recklessly borrowed against their home’s value). Is it any wonder Americans have become more and more cavalier about debt? Their government does it. And our politicians encourage spending over saving. At the heart of this mess is a primary problem: our economy has been in trouble for a long time, but the smoke and mirrors of seemingly comfortable lifestyles that easy credit afforded the slowly drowning middle class made everything seem hunky dory. I am not surprised to see politicians scrambling to figure out this mess, I’m just surprised how few mainstream media outlooks are pointing out the real culprits.
Frankly, I don’t see any bail out saving the housing market. It is certainly ironic that classic free-marketers on Wall Street who HATE regulation would even suggest such a thing. I would hope, however, that if Wall Street gets any sort of “welfare” from the “state” that they would be forced to also swallow the bitter medicine of regulation with it.