Spring Break
Stop wasting government money
Ian Bezek
Issue date: 3/31/08 Section: Opinion
Henry Kissinger famously summed up politics when he said, "90 percent of politicians give the other 10 percent a bad name."
This year's politicians have confirmed the truth of this statement with their bald-faced vote-buying schemes to address the weakening housing market. They've turned a simple problem into a complex money-wasting boondoggle.
The problem, in a nutshell, is that a bunch of ordinary citizens with shaky financial histories, commonly referred to as sub prime borrowers, bought outlandish mansions they couldn't afford after being enticed by artificially low interest rates. Banks were eager to harvest more fees and interest and turned a blind eye to borrowers' credit reports.
As soon as the economy hit a rough patch, the strapped homeowners quit making the payments. In response, banks foreclosed on their houses, then sold those houses at losses in fire-sale auctions, and everyone lost.
The homeowners lost their homes and the banks lost their investment profits. This outcome is natural in a capitalistic free market society; if people make stupid financial decisions, they suffer substantial losses.
However, the politicians saw this unraveling and felt the need to act. As one of my friends said, "if the government isn't making things worse, how can we know they care?"
Officials rushed in to rewrite the terms of loans, thus invalidating private contract law. This extreme measure did nothing to fix the underlying problem -- a guy earning $40,000 a year can't afford a million dollar house regardless of how the government rewrites the loan payment schedule.
The government was not content just to attempt to help homeowners who were in over their heads, however.
A large financial firm, The Bear Sterns Company, was on the verge of bankruptcy. Its leadership had made numerous poor decisions and the free market had deemed the company unworthy of survival. Good companies survive while capitalism kills the bad ones -- it is the natural order.
This year's politicians have confirmed the truth of this statement with their bald-faced vote-buying schemes to address the weakening housing market. They've turned a simple problem into a complex money-wasting boondoggle.
The problem, in a nutshell, is that a bunch of ordinary citizens with shaky financial histories, commonly referred to as sub prime borrowers, bought outlandish mansions they couldn't afford after being enticed by artificially low interest rates. Banks were eager to harvest more fees and interest and turned a blind eye to borrowers' credit reports.
As soon as the economy hit a rough patch, the strapped homeowners quit making the payments. In response, banks foreclosed on their houses, then sold those houses at losses in fire-sale auctions, and everyone lost.
The homeowners lost their homes and the banks lost their investment profits. This outcome is natural in a capitalistic free market society; if people make stupid financial decisions, they suffer substantial losses.
However, the politicians saw this unraveling and felt the need to act. As one of my friends said, "if the government isn't making things worse, how can we know they care?"
Officials rushed in to rewrite the terms of loans, thus invalidating private contract law. This extreme measure did nothing to fix the underlying problem -- a guy earning $40,000 a year can't afford a million dollar house regardless of how the government rewrites the loan payment schedule.
The government was not content just to attempt to help homeowners who were in over their heads, however.
A large financial firm, The Bear Sterns Company, was on the verge of bankruptcy. Its leadership had made numerous poor decisions and the free market had deemed the company unworthy of survival. Good companies survive while capitalism kills the bad ones -- it is the natural order.
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