Another Bad Republican Idea

Let me put my indignation aside, first. When I bought my house, I got a 30-year conventional mortgage. When I refinanced to pay off my ex-wife, I got a 30-year conventional mortgage. I could have lived high for a couple years, waiting for the rate to balloon. Of course, even then, my house isn't more than I could pay for. Offered the ARM, I thought, why would the bank loan me money at a loss? Armed with that thought, I knew they would extract the same amount, if not more money from me if I took an upfront decrease in payment, in other words, that my payment would balloon at some time in the future to make up for lost money.

Now Bush and his financial advisors are floating the idea of a bailout. I don't know the details but I believe it to be a bad idea. Here's why: Competition. Not all banks and finance companies participated in the subprime madness, just as I didn't participate in the ARM. Those who did so should suffer the wrath of the free market, both institutions and those who took the poisonous loans. The only bailout I'd give a homeowner is a chance, one-time, to walk away from the deal with no damage to their credit rating. Finance companies could not have been so naive to believe that markets would always rise and if they were, let them suffer the just punishment they've earned. And if we lose a few, so be it.

The S&L bailout was a bad precedent. All bailouts have led to is weak organizations and bad managers surviving. In this case, the best solution is the ruthless Darwinism of the market: The smart survive, the stupid do not. And the bailout is being engineered by the Bush financial team. That enough should lead one to mistrust it.