The Market and Individual Responsibility
Hillary Clinton touring a Las Vegas neighborhood yesterday:
Clinton said unscrupulous lending leads to bad mortgages, which lead to foreclosures, which lead to people with nowhere to go and vacant neighborhoods that can go rapidly downhill.
First of all, what’s wrong with this picture?
We have the evil lender.
We have the heartless bank.
We have “bad mortgages.”
Which lead to heartless capitalists foreclosing on the poor, unsuspecting homeowners.
There’s something missing in all of that and I will bet you only a conservative could find it.
(Answer below the fold)
HOW ABOUT THE IDIOT CONSUMER WHO TOOK A “TOO GOOD TO BE TRUE” LOAN IN THE FIRST PLACE!
“Unscrupulous” lending? I hardly think any loan officer or mortgage salesman has to pull any kind of trickery on someone looking to buy a home in the “sub prime” market. The very definition of sub prime customers are people who are high risk in the first place. These are people who “want” a home. I am very happy for them. I want a 750 foot yacht but that doesn’t mean I can afford one or that any bank or lending institution in their right mind would loan me the money to buy one.
The basis of the sub-prime crisis is stupidity and irresponsibility - both on the part of the lender and the customer. The lenders believed the housing boom would go on forever, that the price of homes would continue to rise in a fluid market thus giving their sub prime customers who had no business getting a loan in the first place the opportunity to sell their home and move in 4 or 5 years, avoiding the ballooning payments and interest rates.
But something happened on the way to paradise - the inexorable law of supply and demand took over and builders - who were building homes as fast they could throw them up - suddenly looked up and realized they had a slew of empty houses with no customers filling them. The rapid rise in home prices not only enticed builders to build more but the existing home market quickly became saturated with all of these sub prime customers trying to unload their houses before midnight struck and their mortgages turned into a pumpkin.
Conservatives believe in personal responsibility - and that not only includes the homeowners who erred in taking the loans but in the financial institutions that made the loans in the first place. Bailing out businesses that make bad decisions is contrary to the ideals of a free market and only encourages continued bad decision making.
The market should not have a “safety net” where if your company is big enough or has enough political pull, the government will step in and save you from your folly. That way, you make government a partner in the business. That might be alright for Communist China but it shouldn’t be done here.
Taxpayers should not be paying for other people’s mistakes at the personal or corporate level. Most taxpayers I know - myself included - have their own problems and don’t need to be burdened with the consequences of stupidity, greed, and bad judgement exhibited by other individuals or businesses.
And if this ends up hurting the economy - which it will - then perhaps a valuable lesson will have been learned and probity, caution, and responsible lending practices will be rewarded instead of devalued by bailing out those companies who don’t deserve it.
And the people whose homes are foreclosed? Yes it’s sad when someone loses their home. To say that I don’t feel sympathy for families who have made terrible decisions and are forced out of their house would be wrong. And for those who have no where else to go, the government should do its job and lay out a safety net for them.
But most people who are being foreclosed on have jobs and are perfectly able to find another place to live. They probably won’t own the house or apartment but they won’t starve nor will they be thrown out on the street. Do these people really need the government’s help? Democrats think so. Democrats want to reward the irresponsible regardless of their financial situation. Democrats want to give out taxpayer money so that even those who are capable of taking care of themselves will have their mistakes forgiven - thanks to our generosity.
It is not social Darwinism to demand individual responsibility from citizens. Without it, we become nothing more than slaves to the government, dependent on Big Brother to think for us, to make decisions for us - decisions we used to make ourselves. And every time we surrender that decision making and every time we allow the government to step in - even it it is to save us from being hoisted on our own petard - we lose a little freedom. This is the trade off we make - a fact the liberals desperately try to hide from people lest they rebel against their slavemasters and take back their own lives.
But liberals needn’t worry too much. It appears from where I’m sitting that the American people are completely willing to sell their birthright of liberty for the ease and comfort of government serfdom. The liberals have trained us monkeys very well. Vote for them and out pops a banana treat. No need to take responsibility for your own life. Not when there are so many in government eager to run it for you.
LOL. You’re right though.
Exactly.
Yes, that’s also one of the main reasons that I believe that Bush shouldn’t step in and help these companies out. The free market dictates that companies that made big mistakes will have to pay the ultimate price. They will then be replaced by companies that are less stupid. Buy them out this time, and they’ll count on you to help them next time.
And that’s the same everywhere: also here in Europe. The progressives act as if there’s no downside. But there is. And a big one at that.
At your own place you link to Michelle Malkin who notices that Barack Obama jumps on the "help them!" bandwagon. But not just he: McCain is doing the same.
Let the economy and the free market do what they do best: getting rid of excesses. You all enabled the housing market to become artificially high, let the market correct itself. Yes, that’ll hurt in the short term, but in the middle and long term you’re better off.
The government isn’t the solution to this problem: less government is.
This is, by the way, exactly why progressives will, in the end, take over Democracies. Always. They promise to buy people out. They promise to help you when you’re down, they tell you they’ll make sure you don’t have to suffer when you make a mistake.
Like it or not, that’s how it’s done. That’s why progressives will, in the end, win.
And then slowly but surely society will go downhill, until it breaks, the country has to rebuild and we start anew (cycle).
Fascinating stuff to think about.
The other people who will catch the flaw are those with a memory. Who can remember that those complaining of "unscrupulous lending" are mostly the same ones who complained previously about lenders "red-lining" certain areas and refusing to lend to people that they considered "high risk."
If I was a banker, I would now decide that no matter what I did, these people would be outraged — so I might as well settle back to doing what I see as good business practices. They’ll still be outraged, of course. But I’ll be doing the right thing for my business.
Personal responsibility? Isn’t there a constitutional amendment repealing that? Can’t recall for sure…
And as you’ve pointed out in the past, Rick, the Sharpton/Jackson crew is the first to complain about redlining practices- where overly-strict (read: racist) lenders won’t make loans to minorities in certain geographical areas. But when the lender decides to make the loan and it goes south, it’s the lenders’ fault for not talking the innocent consumer out of it in the first place. One might think it’s kind of a no-win deal for blood-sucking capitalist lenders.
Michael- you wrote- The progressives act as if there’s no downside. But there is. And a big one at that. Absolutely.
Yes, that’s also true. And about the being a banker: yup. Just ignore public opinion and do what you do best.
Ya beat me to it, wj.
And as you’ve pointed out in the past, Rick, the Sharpton/Jackson crew is the first to complain about redlining practices- where overly-strict (read: racist) lenders won’t make loans to minorities in certain geographical areas. But when the lender decides to make the loan and it goes south, it’s the lenders’ fault for not talking the innocent consumer out of it in the first place. One might think it’s kind of a no-win deal for blood-sucking capitalist lenders.
True: but that’s not really an excuse for their behavior. They should just explain that time and again and say "if you don’t like it, start your own bank. We’re not taking risks."
admin: repeated personal attacks even after warnings = ban.
Michael warned you last time that the next one would be a ban, so don’t claim you weren’t given fair notice.
kreiz: "Two great minds with a single thought."
Also, I think there is a logic of self-interest for people to help those who are down and out or close to a crippling degree of destitution - by giving a short boost to prevent people going below the surface and having to scrape themselves back you can keep them in the economy, with a higher level of consumption and taxes paid.
But this is just a calculation, and I am not saying I’m good at substansivist economics or stuff like that.
I just have an allergy to people of the same general political direction agreeing with each other and being amused by bad attempts at sarcasm and laments.
Oh. So you are an "edgy" and "straight-talking" one.
"One" what?
"Any man who judges another by the group is a pea wit." (Sgt. Buster Killrain, Gettysburg.)
Also, all caps isn’t cruise control for cool.
Also, commenters should try for coherence at all times.
It’s just that I don’t want to agree with you.
I wanted to say that comment is juvenile and self defeating but I won’t. Instead, I’ll simply ask you to get your parents permission to visit this website next time.
My first instinct is toward personal responsibility. But after listening to some borrowers, there was also some responsibility to be borne by lenders, who were portraed as being in a frenzed rush to book loans- with the attendant fees, commission, etc.. all based on the likelihood of increasing land values. In addition, subprime borrowers are definitionally not sophisicated people and view lenders are credible experts to be trusted.
Guess I’m moderating my initial reaction at #3 above.
On the other hand, one can feel that the subprime borrowers were misled without believing that it is terrible that they will no longer be able to "own" their homes. Absent the subprime mortgage they have, they would have been renting the whole time. If they started with a "no down payment mortgage," paid what would have been the rent money as a mortgage payment rather than as rent, and now are back to a rented residence, how is that different than if they had rented all the time?
Of course, the people who got subprime mortgages on investment properties (and that seems to be a large chunk of the total, from what I have read) don’t deserve a whole lot of sympathy in anybody’s opinion. But they seem likely to be significant beneficiaries of whatever subprime bailout plan finally emerges.
FOur out of ten sub-prime mortgaged properties have more than one mortgage. Did some people get suckered into loans they couldn’t afford by unscruprulous originators only interested in collecting their sales fees? YOU BET! Does that describe the majority of sub-prime lending, or even the majority of the defaulters? Nope. Most sub-prime loans in default are simply money lent to people with sufficient incomes but lousy credit scores. And they had lousy credit scores in the first place because they were bad with money, and rode their credit too hard. Giving them mortgages magically reform them into monetarily responsible citizens–it empowered them with equity to make more bad decisions. As PJ O’Rourke put it in another context, that’s like giving whiskey and car keys to teenage boys.
You won’t catch me crying for the lenders and mortgage pool packagers either. They thought they could outsmart the fundamentals by bundling the risk with pooling. And the originators were fine as long as the wheels kept turning and they could sell their new loans to the poolers. Heh.
I not that the Bush plan is designed to help individual home-owners, and the Clinton plan is aimed at “help[ing] states and localities deal with the fallout of foreclosures.” More gimmes and “urban renewal” there, precious little help for individual homeowners in a swueeze.
The borrowers’ low credit scores tells me one thing, Tully- lenders were making hard-money loans- that is, that repayment would come from the value of the underlying collateral rather than the borrower’s ability to pay. Apparently they didn’t see much risk in the bursting of the housing bubble. It really reminds me of the S&L debacle in the Soutwest in the 80s- reckless lending practices fueled by greed and easy money.
In one instance, an interviewed borrower said that she told her lender that she would have to make monthly payments on credit cards. The lender said not to worry- the land’s increasing value was all that mattered- refinancing would be easy. Just another form of high risk gambling- unbelievable.
Here’s the deal Kreiz: both are responsible. Both screwed up. Both have to take responsibility. Companies may go broke, so may individuals. That’s because they made bad decisions. Life’s like that.