Saturday, April 05, 2008

Who Should Get The Taxpayers' Money


In flattering McCain (who Will still appears to detest), George Will presents a false dichotomy, pretending McCain supports a solution to the "economy's housing-related credit woes" that doesn't involve any bail-outs whatsoever. Quoting McCain, Will writes:
He says "it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers." For now, he is with Senate Republicans in opposing the Democrats' proposal to empower judges to rewrite the terms of some mortgages, an idea that strikes at the sanctity of contracts and hence at the ethic of promise-keeping that is fundamental to social life. He opposes an additional dose of the toxin that has made the credit system sick -- he favors strengthening rather than weakening down-payment requirements for loans backed by the Federal Housing Administration. And he has admirably avoided the rhetoric of victimology, such as that used when The Post editorialized that "lenders pushed tens of billions of dollars in potentially high-interest mortgage debt on people ill-equipped to handle it."
So the honest translation would be that McCain opposes only aid directed at borrowers. While he wants stronger guarantees that federal loans will be repaid, something that to me is a perfectly reasonable demand, he has not actually opposed bail-outs of financial institutions. He just wants to add a few more strings to the bail-out packages they receive.

The honest question this might raise is, why support bail-outs of those who were in the best position to prevent this from happening in the first place, while providing no benefit at all to those (whatever you think of their culpability) on the other side of the loan? If Will were to think about it, he would recognize that offering bankruptcy relief to those borrowers wouldn't let them avoid their loans - it would allow them to discount their loans to the present market value of their homes. The borrowers would have their creditworthiness severely downgraded for a decade. But the owners of the loans, not the taxpayers, would have to absorb the difference. That, it seems, is unacceptable to either George Will or John McCain.

I'm not going to benefit from the bailouts - If I even own stock in any of the financial institutions involved, it's part of a mutual fund. And I'm the opposite of the sort who purchases "more home than I can afford" than maxes out my HELOC. As a conservative borrower and spender, who believes in paying my bills in full, I am hardly brimming with sympathy for those who chose to believe promises that were plainly too good to be true. Yet if my choice is between having my tax money used for a bailout, or having irresponsible lenders take a loss due to the bankruptcies of their irresponsible borrowers? I'll support the bankruptcy reform, thank you very much.

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