Help, I've Borrowed And I Can't Get Up

I was going to put up a different posting for the weekend until I saw the Toledo Blade Editor of June 6th "Mortgage aid that would help" (unfortunately, I am not able to provide a link, as none was available for this editorial). Reading it set me off, and changed my plans. In it, the Blade makes the case for the bipartisan bill currently running through the Senate to place up to 500,000 additional mortgages back into play. The Blade seems to feel that it is all right that the lenders would take losses on these loans (after all, they are big business), in spite of the still largely unstable position of the financial industry. Instead, they agree that these mortgages should become government sponsored loans through Fannie Mae and Freddie Mac, who back many of the less speculative homes loans already. This would mean that these mortgages too would now be guaranteed by the American taxpayer.

I mention these less speculative loans because it appears that many of the troubled mortgages were indeed speculation. We need only to look at the case of Rep. Laura Richardson whose three homes and mortgages in California has recently come to light as a shining example of personal fiscal irresponsibility. She ended up defaulting on one of the mortgages, and is still negotiating on the other two properties with the lender, to whom she has not made a payment in some months. 

Set aside her case though, and we can note that some of these houses were purchased by "house flippers", people who purchase houses in marginal condition with the idea of improving the property over a period of mere weeks and selling them at a profit (you may have even seen some of them on TV). Many more of these homes were purchased by people "gambling" on the continuing growth in housing prices and buying much more home than they needed or could afford to purchase. Now with the economy in peril and housing prices down by an average of over 10%, both of these groups find themselves on the wrong side of a market swing and are finding it difficult to make the payments required or sell the properties that they gambled on.

Now just to prove that I am not the heartless and cruel bastard that I appear to be, I will concede that their are people legitimately caught in a situation in which they did no wrong. Loss of a job, an unexpected reduction of income level, or simply personal circumstance has placed the homes of some people in peril. I can only say that while they have my sympathy, they do not however, have a right to my support. (OK, maybe I am a heartless bastard after all.)

My question here is "What's Next"?

Maybe I recently bought a large SUV? The vehicle wasn't cheap to start with and now gas is getting awfully expensive to feed this beast. As a consequence I am now on the edge of financial disaster. Will the government guarantee my car loan or force the lender or dealer to renegotiate?

Maybe I have recently purchased a new big screen TV, a surround sound system, and some comfy chairs to sit in while watching and listening to these two marvels of modern technology. My credit card debt is now becoming quite alarming, I am barely capable of making minimum payments, and with the high interest rates on credit cards, I am sinking deeper in debt every day. Will the government force the banks to give me a lower interest rate or renegotiate the balance on my account?

I know, we are not talking about a TV or a car, we are talking about putting some poor family out on the street. (Well, as the examples listed above have shown, this is what we are doing in at least some cases.) Unfortunately for the the emotional side of this argument, the principle that I have logically established remains the same. What about the people who bought houses and are making their payments, are they deserving of no help because they are meeting their obligations? What about people who haven't bought a house and are living in rental properties, don't they have the right to government help to buy something and join in the game?

If government is obligated to step in for a home loan, then the rest of this is simply quibbling about where we draw the line in the sand. For me, I chose to draw it on the side of no government involvement in the first place. The government that the Founding Fathers designed for us guarantees us an opportunity to succeed, not a guarantee of success. Unless we all draw the line and stop this continuing drive towards government interference and control, there is a great deal more pain and heartache to look forward to.