By Arnold Kling
The New York Times has a story about borrowers who worry that they are hurting themselves by paying their mortgages and perhaps missing out on a bailout.
“If the government says, ‘Prove that you can’t afford your house and we’ll redo your mortgage,’ then people are going to try to qualify,” Mr. Schiff said.
In that situation, those who will benefit the most are the ones who, unlike Mr. Lawrence, spent far beyond their means — who refinanced their houses and used the cash to buy toys and lavish vacations, or sometimes just to pay the bills.
I am still waiting for profiles of borrowers that make me think they deserve a bailout. That is the dog that has not barked in the news coverage of the crisis.
making modest investments in dozens of banks, whether they needed it or not, produces little for the public beyond the small profit for the Treasury. What it does do, however, is open the door for every politician and populist to second-guess every decision and expenditure the banks make, based on the false assumption that everything they do is with “our money.”
Pearlstein prefers the original Paulson plan, to buy mortgage securities. On that, I disagree with him, but read the whole column. To me, what is amazing is that Paulson spent $1000 per American household, with none of our permission, and so far Pearlstein is the only one complaining. At one point will people wake up to the fact that transferring more power to Washington is not the answer?
Finally, Russ Roberts writes,
By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next.
Exactly. The private sector is like the victim of a snake that spits venom that causes paralysis. The snake is the government that is “here to help.” Read the whole column.