This was in yesterday’s WSJ (emphasis mine):
The subprime sales pitch sometimes was fueled with faxes and emails from lenders to brokers touting easier qualification for borrowers and attractive payouts for mortgage brokers who brought in business. One of the biggest weapons: a compensation structure that rewarded brokers for persuading borrowers to take a loan with an interest rate higher than the borrower might have qualified for.
Source: Wall Street Journal – Subprime Debacle Traps Even Very Credit-Worthy ($)
That last sentence is the KEY to this whole mess! That’s the reason why things are the way they are.
I know I’ve been writing about the subprime mess a lot lately. That’s because every morning there’s a fresh article in the Wall Street Journal about the mess and what’s being done or should be done to fix it. Unless the government is going to track down every thieving mortgage broker and make them cough up all the money they “earned” by putting people in crappy products, I’m not on board with this mortgage bailout plan! Since we all know that’s not going to be done, I think that NOTHING should be done to fix it! N-O-T-H-I-N-G! To try to intervene in this situation is anti-American! It goes against our free-market principles and will only reinforce our dependence on “mommy and daddy” to come bail us out when we’ve made a bad decision.
Sure, I feel sorry for these people. I really do. However, there are consequences for our decisions. Good decisions usually equal good consequences while bad decisions usually equal bad consequences (unless the government comes along and bails you out).
I say we let market forces work out this situation. If lots of people lose their homes, there will be lots of cheap housing available to those who actually saved up money to buy a home. Credit standards will tighten and things will eventually go back to a more “normal” normal. Unless those who are foreclosed upon are jobless, they at least have an income. They can rent an apartment somewhere until they get back on their feet.
That said, I don’t think we can expect a rational approach to this situation. Why? Election-year politics!