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Savings Experiment: Snow RemovalWhat ever happened to personal responsibility? Apparently, in an election year, it doesn't exist. President Bush's plan to help out homeowners who took adjustable rate mortgages is to freeze interest payments on hundreds of thousands of adjustable-rate mortgages for three to five years. Why should these people be bailed out? What is missing in this whole sub-prime issue is that these mortgages were introduced for individuals who wouldn't otherwise qualify for a more traditional mortgage. This hi-risk mortgage was created for people to reach the American dream of owning their own homes. Over about 90% of those who took these mortgages are still paying them back. Why are we bending over backwards to bailout out this small minority of people, who for the most part, couldn't get a normal mortgage because of their financial situation? Isn't this teaching them that they do not need to be fiscally responsible for anything they do because politicians will "take care" of them to get their votes?
In the late 90s, when the then Secretary of the Treasury Robert Rubin helped bail out Wall-Street firms during the Asian currency collapse, Wall-Street firms had a precedent that no matter how wrong, corrupt and just plain bad business they did and whatever risk they took upon themselves, it didn't matter because if there was going to be a blowup, the Federal Government will save the day. Perhaps they took this lesson to heart and the billions and billions of dollars being written off due to their exposure to subprime, CDOs, etc. is because they knew they could take a risk and ultimately would never have to pay the piper.
I am afraid that the small percentage of individuals who are currently being pandered too will learn the same lesson. Let's wait another decade and see what they end up doing and how they end up getting bailed out.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/7/07.
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Reader Comments (Page 1 of 1)
12-07-2007 @ 11:51AM
dcmeyer said...
Why did this happen?I believe it happened because the government encouraged us to help save the economy by spending money and it was encouraged by the low teaser interest rates.All human beings hope to better their lives by being part of the middle class.For one reason or another some never had the opportunity to buy a new home.So why blame people for having hope and accuse tmem of wrong when the mortgage companies and the Fed were the enablers?We spend billions on a war and worry about spending far less to help people used by the government to keep our economy going strong by buying homes built mostly by illegal workers.That is why the drop in housing starts has little to do with employment rates.Illegal workers are not counted as unemployed ;just out of luck.
12-07-2007 @ 12:07PM
dcmeyer said...
Why did this happen?I believe it happened because the government encouraged us to help save the economy by spending money and it was encouraged by the low teaser interest rates.All human beings hope to better their lives by being part of the middle class.For one reason or another some never had the opportunity to buy a new home.So why blame people for having hope and accuse tmem of wrong when the mortgage companies and the Fed were the enablers?We spend billions on a war and worry about spending far less to help people used by the government to keep our economy going strong by buying homes built mostly by illegal workers.That is why the drop in housing starts has little to do with employment rates.Illegal workers are not counted as unemployed ;just out of luck.
12-07-2007 @ 8:16PM
don said...
Where is the love ? When your neighbor is in distress it is your duty to offer your assistance and not just to turn your back and act holyer than thou. It also makes good business sense for all parties concerned because helping these borrowers will add stability to the credit and housing markets.This situation that we are in is not about who did what but about and let us punish
the less fortunate but about what makes good business sense for everyone. Evidently you didn't take economics 101 or if you did you failed.
12-07-2007 @ 1:11PM
Brockage said...
SAVE THE DEADBEATS! You ask whatever happened to personal responsibility -- I must report that it has been dead these past seventy-two years. The federales have become our helpful big brothers. It makes me feel all warm and cozy to know that government employees who are smarter than I am and know what is best for me are mapping out my life for me. Thank you Senator Claghorn and colleagues.
12-09-2007 @ 7:57AM
eugene said...
I thought the basic principle of our economy was to let the market sort itself out? The "collapse" of the real estate market is a normal and much needed course adjustment. Having the federal government step in at this point to bail out people who were too ignorant to learn the terms and conditions of their own home loans is completely contrary to the basic principles of capitalism.
As for the question of personal responsibility versus helping out your neighbor in need... Well, Bush answered that question, his personal responsibility was to help HIS neighbors... his cronies who are losing their wealth as banks get hammered on losses due to poor controls on loans. Who gets to bail out the wealthy? The working middle class.