mortgage bailout (update)

It's happened.
see bloomberg for more details.

Because the current administration is Republican, the scope of the bailout is much more limited in scope. Democrats are already criticizing the proposal.

People who have sat on the sidelines for years, responsibly saving up their money, are getting the short end of the deal. Not only are they going to have to wait even longer, due to the ever shrinking availability of credit, their taxes are now going to pay for those who were irresponsible.

What I'd like to know is, why is no one asking the one fundamental question? That is, why should the government bail out those who committed fraud, instead of persecuting them? Yes, applying for loans by inflating information on financial assets (including salary) is fraud.

mortgage bailout

we are now in the midst of a housing crisis in the united states. the bubble of the housing market has burst, and housing prices are dropping. which is not a problem in iteself, but in the past two years, the majority of loans have been given to people with sub-par credit taking out subprime/high risk loans who believed that housing prices would rise forever and that they'd be able to cash out. coupled with rising interest rates, too many people can no longer afford their payments, and are defaulting on their loans, bankrupting lenders such as new century financial and even hurting industry stalwarts such as bear stearns.

recently, politicians have proposed legislation to bail out such people. whether this is a good idea depends, among other things, on one's view of the role of government, as well as the scope of its powers.

first, is it the government's responsibility to bail people out of bad decisions (life, financial, etc) they have made? by no means should this question be entangled with whether the government should seek out and prosecute those who took unfair advantage of the ignorance of a populace.

second, should the entire population be responsible for poor decisions of a subpopulation? government bailout of such homeowners manifests as a tax on the rest of the population, in one form or another. as a non-homeowner (albeit an aspiring one), i have to ask why my taxes should go to pay for people to stay in houses that they cannot afford, while i myself am taking the responsible route and diligently saving.

third, one wonders about the motivations of the politicians who propose legislation. how do they stand to benefit if such bills are passed? the housing bust is a hot topic, and i can only imagine that they are taking the short sighted route- ruining the cyclic nature of any financial market for short termed gains (i.e. garnering of votes) without calculation of the repercussions that such actions may have long term.

legislative attempts have failed or been put on the back burner, but only time will tell.

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