In the Washington Post, David Ignatius writes about the long-run economic costs of mortgage bailouts, which infantilize voters. Through bailouts, we are ”creating a system of transfer payments that shifts money from the smart to the stupid, from the lucky to the unlucky. Well-managed banks that controlled their risk levels will subsidize poorly managed ones that didn’t; prudent homeowners who decided not to take the interest-only refinancing loans will subsidize imprudent ones who did.” (Most Americans oppose mortgage bailouts, as do many at CEI).
Ignatius also notes that “the last round of crisis-driven regulation — the Sarbanes-Oxley legislation that followed the Enron scandal — created more busywork for accountants than real protection against abuses.”
CEI is helping challenge the devastatingly-costly Sarbanes-Oxley law in court, arguing that the regulatory agency it set up violates the Appointments Clause of the Constitution and separation-of-powers safeguards. The court case is called Free Enterprise Fund v. Public Company Accounting Oversight Board. FEF v. PCAOB will be argued before the D.C. Circuit Court of Appeals on April 15 at 9:30 a.m.
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I agree with the poor choice the mortgage bailout would be. I must take you to task about your generalization of those that have interest only loans. If used properly, an interest only loan will allow the homeowner to leverage their equity and invest it in a higher interest rate investment vehicle. Over time the equity is invested in liquid investments the would easily be accessible to pay the mortgage in the time of need when a regular income is not available as opposed to having the equity payed down to the bank (where no interest is earned by the mortgage holder) and will they let you access it in order to help pay the mortgage? No.
If used properly over the life of a 30 year mortgage, an interest only loan will yield a much higher return on investment and protect the homeowner from loosing their home during times of financial distress.
Thank you for letting me share my viewpoint on this matter.
Sincerely,
Greg Jeffcoat
Should I stop making my mortgage payments so I can get in on all this gift money?