by Jack Lee
by Jack Lee
“Dumb: Buying a house you can’t afford with no down payment and a loan whose monthly payments will explode in a few years.
Dumber: Lending money to people who can’t afford a traditional mortgage, especially when they have lousy credit ratings and don’t substantiate their income.
Dumbest: Bailing out dumb and dumber, especially with taxpayer money.” Kathleen Pender, SF Chronicle.
In a stunning departure from conservative principles, President Bush is offering a massive FHA bailout to homeowners that made bad decisions to buy more home than they couldn’t afford. This is generally in the category of sub-prime loans, loans made to marginally qualified buyers or speculators.
This is a free society and we have a time honored tradition of allowing people to make bad or good decisions. The job of government is too stay out of the way as much as possible!
Mr. President, the people that bought these sub-prime loans are risk takers and they were hoping interest rates would remain relatively flat in a good market so they can leverage their money. This would then allow them to make
a big profit from a quick sale or build enough equity to refinance to a long term fixed rate. But, even if they were buying it for a residence, this was a gamble and unless there was fraud involved I don’t see why they deserve special treatment.
We must all learn from our mistakes. Home owners or home speculators, either way, it’s not our taxpayers problem to solve. It was the home buyers choice to take the gamble. If they didn’t understand the risks…then they should have, we call this due diligence and it’s only reasonable to expect that we will all be diligent when it comes to protecting our own assets.
Mr. President, where was the government when energy companies fleeced so many stockholders a few years ago? Those big energy companies, and there were many, broke the law with illegal trades and some went so far as to cook their books! If anyone should be helped out, it should have been the victims of that fraudulent criminal conduct, not these risk takers who got caught when the hot housing market cooled. That energy fiasco that cost innocent people so much was coupled to a government screw up right here in the State of California when our lawmakers unilaterally deregulated energy prices and that defied a basic law of economics! This was not a matter of investors making bad choices, these energy victims were blindsided by both foolish government and corrupt energy companies and they lost billions; many lost their retirement money and government did absolutely nothing to recover their lost money despite governments complicity though negligence and a lack of oversight. This contributed to corrupt corporate practices that went on unabaited for many years prior to the collapse triggered by ENRON.
The sub-prime loans and or A.P.R. loans that are in trouble now are part of the natural consolidation of a housing market that formed a huge bubble until it burst, just as predicted by many in the media. Too many reckless people bought into that bubble right up till the end and that’s a shame, but its not our problem. The market has cooled and their home equity has evaporated or their home price has dropped to the point they owe more than the home is worth. If those buyers choose to walk away from their contract and the home goes into foreclosure, this is still their choice; however they are covered by mortgage insurance in almost every case. I would hope this bailout is not about protecting insurance companies?