The Wall Street Journal reports this morning in a story entitled "Democrats Face Rescue Backlash" that voters are getting fed up with government intervention in the market. When Congress and the President decided to bail out the lending industry (which, of course, has lead to more calls for bail outs), some conservatives warned that government was taking too large of a role in the market. Congress is now attempting to use taxpayer money to bail homeowners out of mortgages they could never afford (the WSJ says "who can no longer afford their mortgages," but they never could afford them to begin with, which is why we're in this mess).
Much of this is election year pandering. Government has no role to guarantee freedom from investment risk. If people make foolish investment choices, they need to be prepared to suffer financial loss. The market will take care of itself -- financial failures will drop prices in the short run, houses will be purchased by qualified buyers under smart lending terms, and long run stability returns. However, for the presidential candidates to suggest this scenario on national television would be political suicide. No matter how one rationalizes this (market forces, heartless policies, intervention important for banking stability) people will expect government assistance to avoid foreclosures.
Many of us, including all of us on this blog, were wary about federal action in the Bear Stearns case. Now Congress has set a precedent that allows it to consider forcing Americans to pay off the mortgages of those who made bad choices. Politicians today don't seem to care about free markets, private property rights, and personal liberty for people to succeed or fail on their own. Rather than personal responsibility and protection for taxpayers, the theme rests upon guarantees for bad investments. The subprime mess was created by two groups, lenders and borrowers. They should bear the responsibilities of fixing the problem.
Recent Comments