Obama plans to bail out people who took out mortgages they cannot repay [h/t Instapundit]. This sucks. Why? Why would I be so heartless as to oppose helping people whose home ownership stands at risk due to the banking crisis?
Simple, an individual’s ability to pay their mortgage has nothing to do with the solvency of the lender who issued the mortgage. Money flows from the borrower to the lender. The fact that the lender made too many dubious loans does not in any way affect any particular individual’s ability to pay their own mortgage. Only the individual’s income and budgeting controls whether they can pay.
What about people who lost their jobs? Loosing jobs is part of life. Everyone will lose a job at least once in their life. People who took out mortgages and who did not budget for the possibility that they would lose income for a period behaved irresponsibility. Besides, people who pay rent also lose their jobs. Who will help them out?
The ugly truth is that most people who are in trouble today fall into two groups: people treating their houses like ATMs and people speculating on residential real estate. The former took out home equity loans and then spent the money on lifestyle/consumer spending or to buy a business. The latter purchased houses not to provide themselves housing and a long-term nest egg but rather to flip them over in a few years for a profit. They treated their houses like a business. Both these groups took financial risk on their own initiative for their own benefit. They should bear the consequences of those individual financial choices.
The only people who really need help are people who need to borrow money for unanticipated repairs. People do have a reasonable expectation that they can borrow a few thousand dollars in order to repair some damage not covered by insurance. The present banking crisis prevents them from doing so. Since the government jammed up the banks, the government can step in temporarily to help people get loans unrelated to the original mortgage.
Just as with the bailout of the states, Obama seeks to reward the reckless and self-indulgent at the expense of the prudent and self-denying. People who did not take mortgages they could not pay now must pay for their neighbors’ extravagance. People who bought houses to live in must bail out those who speculated recklessly.
The ants are enslaved to the grasshoppers.