Rewarding the reckless
Did you catch Wonk-esse Jamie and her blog post today? It's about people who are angry that "all the housing-related bailouts are handing a bill to taxpayers who played by the rules and are paying their mortgages or their rent."
I've been watching the housing meltdown and the political reaction to it, and I have to agree with the readers on Jamie's site and the people quoted in the AP story. I'm angry, too, that we seem to be rewarding the reckless.
As the story says about the government bailout of Fannie Mae and Freddie Mac:
Meanwhile, tens of millions of people pay their mortgages on time, don't max out their credit cards and put money into retirement funds. They may even save a little extra on the side.
In return, they get rates on their savings that don't even keep up with inflation. They also are witnessing the horror of their nest eggs shrinking as the value of their homes plummets and the stock market tumbles.
Washington policymakers seem more focused on rescuing those who behave badly by putting at risk taxpayers who have played by the rules.
I agree with Commenter Nick T., who said:
It seems as if our entire economic system is propped up on the allowance of companies to seduce and persuade Americans to buy too much because "they deserve it" and let the debt ride.
When do we, as a nation, stop encouraging people to spend money they don't have? When do we stop convincing people to keep buying to live the American Dream? And why is it that the story of the grasshopper and the ants seems to be turned on its head right now?
Why, in this modern day fable, does the grasshopper get saved from his days of careless loafing and foolish spending, while the good ants who were working hard, saving for a rainy day and thinking ahead for the future... they're the ones feeling left out in the cold now?
Check out angryrenter.com. Regardless of who is running this site, I think there is a sentiment there that I'm hearing more and more from responsible people who aren't crazy about the government bailout.
I've talked about this before, but when I purchased a home five or six years ago, I couldn't find a real estate agent who would show me a house for under $100K. They kept insisting that I could afford more, even a $200K house if I wanted on my salary. I wasn't convinced. Things would be tight, I said. They insisted I was worrying for no reason. I said, hey, I'm a born worrier. I insisted that I didn't want to be stuck with a mortgage I couldn't afford if I happened to lose my job.
In the end, I ended up ditching my Realtor and finding a nice affordable little house on my own for far less than $100K. I'm glad I did it because my mortgage is still manageable even if I were to lose my job tomorrow.
Now, I'm not saying all consumers did this, but how many people out there bought homes knowing full well they couldn't afford it and knowing full well they were falling for a line when the bank or real estate agent convinced them they could afford more house? How many people thought they could live off of flipping houses only to get stuck with housing stock that needed far more work than they could afford or were being sold for prices that were far too high to sell?
How mad are you that while you were playing by the rules, others were living their financial life far more recklessly and now they government is going to save them? And how mad are you that the banks and mortgage companies that played hard and fast with the rules of lending, and in some cases, outright lied -- they're being saved now, too? And worse, this big bailout is being paid for on the backs of you, me and all the taxpayers out there whether you were a wise saver or a reckless spender.
What's the lesson in this absurd fable? Live your life recklessly and someone will eventually rescue you, regardless of whether you deserve it or not.
Categories: College/Financial aid, Complaints, Debt, Economy, Loans
Comments
I agree that people need to take responsibility for their actions. But I keep thinking about people who could have qualified for more reasonable loans but who were led to subprime mortgages and other products because they're more profitable for the providers.
It wasn't that long ago that banks wouldn't give you loans unless you proved you could pay them ... after this whole housing fiasco, we've returned to that standard.
DD: Liz, you're right about banks misleading some consumers. That's why it ticks me off so much that we're bailing out those same banks now.
Posted by: Liz Kay | August 20, 2008 2:25 PM