This sort of goes hand-in-hand with the economics discussion we’ve been having ’round these parts, the new housing/”mortgage relief bill” signed by The Decider this morning:
“We look forward to put in place new authorities to improve confidence and stability in markets,” White House spokesman Tony Fratto said. He said the Federal Housing Administration would begin to put in place new policies “intended to keep more deserving American families in their homes.”
As opposed to undeserving American families, who can live on the street.
It’s an odd measure. There’s $300 billion for new government-backed, lower-interest loans to people who can’t afford their current mortgage payments, though homeowners’ banks have to agree to let them out of their original mortgage, and take a loss (though obviously not as much of a loss as if the home went into foreclosure). There’s $3.9 billion for grants to communities to fix up foreclosed properties; fine. But then there’s this:
$15 billion in tax cuts, including an expanded low-income housing tax credit and a credit of up to $7,500, to be repaid, for some first-time home buyers.
So the measure doesn’t merely seek to bail out homeowners who got in over their heads; this sounds like a governmental attempt to stimulate more homebuying amongst those who, ostensibly, can least afford it. Here’s why:
The measure also is designed to help stabilize markets, in part by making credit more easily available amid rising defaults and falling home values.
So we want to make credit more available even as we’re recovering from this economic slump caused, in part, by credit that was too easily available.
Truly, we’ll never learn.
And so ultimately what we’ve got is a bill designed to help people avoid the consequences of the bad decisions they either made, or were pressured into. And to the extent that they were misled by their lenders, then yes - some form of governmental redress is appropriate. Though one would also hope it would seek to punish the lenders in question.
But one line in particular leaps out from the story. The president himself sought a provision “to keep homeowners from making overly risky mortgage choices by requiring lenders to show how high a borrower’s payment could get under the terms of his mortgage.”
What is this, but government trying to save you from yourself?
Sure, you might be predisposed to taking out a risky loan. You might be foolish enough to get a balloon mortgage. You might foolishly be staking the farm (or the split level) on the delusion that home prices are only going to rise rise rise, and thus you’re going to be able to sell the home at a significant profit. Maybe you are engaging in fiscally reckless behavior.
No matter. Your government’s got you covered.
It stands to reason that if the government wishes to discourage fiscally reckless behavior by individuals, it can’t always rush to the rescue this way. People make mistakes; but why should those who did not engage in this recklessness be forced to subsidize those who did? Why should you, who took out a traditional 3o-year loan and scrimped and saved to put as much money down as humanly possible; you, who pays extra when you can on principal; you, who maybe refinanced and wound up with a higher monthly payment but a loan that you’d pay off years earlier - why should your tax money be used to bail out the guy who put no money down on an adjustable rate mortgage, or the bank that loaned the money to such customers in the first place?
Again: Yes, there were people misled into bad situations. Yes, people with little financial acumen got in over their heads. And yes, government may bear a moral responsibility to aid those in such situations.
But doesn’t government also have a responsibility to those who managed their affairs wisely?
