From Why Bush’s Mortgage Bailout Plan is a Bad Idea.
” Government intervention will keep the current (and artificial) price bubble propped up. This is completely unfair to people who play by the rules. It also creates a moral hazard by rewarding the borrowers and lenders who got greedy, and undermines our entire system.
Should someone who lied on their mortgage application get a second chance? Of course not. These people should be prosecuted for fraud. What about the people who took out an ARM just so they could afford a McMansion? Do they deserve the opportunity to refinance into a lower rate at the expense of taxpayers? No! And what about the lenders that were so keen to make money off of creative loan products? Should they get to transfer risk to the taxpayers? Definitely not.
Yet, Bush’s plan (which he is refusing to call a bailout even though that is exactly what it is) will let borrowers who lied, cheated, and gambled, and the lenders who enabled them, to come out smelling like a rose.”
Not that I don’t feel bad for people who are running into trouble now, but it goes to show how careful you’ve got to be with this stuff.
Interesting article! I might rant on this in the near(ish) future.
