The Washington Times has an editorial today, “No Bailout,” explaining why the Treasury Secretary’s plan to freeze mortgage interest rates for people who borrowed more than they could afford is unjust. As the Times points out, if people can’t afford their monthly mortgage payment, and want it reduced, then they should be willing to take out a longer term mortgage (say, 40 years) to offset that lower monthly payment, rather than just getting a cut in their interest rate at the expense of investors and taxpayers.
Martin Feldstein, former Chairman of the Council of Economic Advisors, explains in The Wall Street Journal today why the bailout is a terrible idea that will undermine confidence in financial markets.
I deliberately chose not to borrow more than I could afford when I bought a house. As a result, I bought a little two-bedroom house, and did it on a fixed-interest rate that was initially higher than what I would have paid on an adjustable-rate mortgage, but in exchange was guaranteed not to rise. Now, the government wants me to bail out people who took an adjustable-rate mortgage with a low introductory rate that was certain not to last, in order to buy big houses and fancy cars like a Lexus (I drive a 1994 Saturn). It wants to freeze their interest rates at their current low rate, even though they should have anticipated that it would rise.
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The proposed mortgage bailout rewards greed and further marginalizes personal accountibility. This sub-prime crisis we find ourselves in should be leveraged for good. Shout this lesson from the rooftops “Live within your means”! Sure, the economy may suffer for a while, but Americans as a whole will benefit from a renewed strength of character.
Just another government fixup that causes far more damage than it cures.
As soon as the first such freezing occurs - it’s voluntary for the banks, remember - watch the class action suits pour in from the victims of discrimination. I am sure the complaints are all ready at hundreds of firms. Some judge will quickly qualify it and that’ll put an end to it. Don’t the banks legal dudes see this?
I too am throughly fed up with those who are financially irresponsible getting a free ride at my expense - I pay my bills on time - live within my means and drive a 1991 Ford Escort. If people who are financially irresponsible get a rebate on their loan than I want one also or it’s discrimination - any lawyers out ther want to do a class action suit for those of us who know how to keep their bills paid but get kicked in the teeth for doing so?
The move of mortgage bailout may bring down interest rates, but experts are less sure that it will stem foreclosures and falling home prices.
Treasury Secretary Paulson’s Troubled Asset Relief Program was not the kind of credit repair scores the endangered homeowners needed. However, a new mortgage program is underway. Thanks to the Federal Deposit Insurance Corp Chairman Sheila Bair, 1.5 million homeowners will have a sturdy backbone when they’re facing foreclosure. This $24.4 billion program will be drawn from the $700 billion pool that TARP set up. With this straightforward system, lenders will be given a fixed amount of $1,000 per loan they renegotiate with financially stuck homeowners. In addition, the FDIC has promised to take on up to 50 percent of the loss in the event of a default on a loan. While others view the action on Bair’s part as a needed investment to maintain liquidity in the mortgage industry, Paulson has predestined this as mere spending that will only bankrupt the FDIC. Although this will no doubt require a lot of time to solve, it’s definitely a noble effort to help repair credit.
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