Mr. Finn,
I am writing to express my extreme disappointment in your proposal for the bailout money. I sold my house 3 1/2 years ago to move back to California near my parents to be a support. The price of housing was outrageous when we moved back so we chose to rent because it seemed obvious that the prices were unsustainable. We are saving up for a down payment to buy a home for our family of (soon-to-be) 7. The fact that you propose to allow those who made foolish decisions with their money to be saved in their houses by taking money out of my family's pocket is appalling. Why should we and the other 32% of Americans who rent have to pay for the 5-10% of Americans who risk losing their homes. I ran into so many people in the last 5-7 years who refinanced to pull money out and add on to the house, go on vacation, buy toys and otherwise waste their principal that it is offensive to me that I should have to pay to keep them in their homes. This country was founded on the belief that people should have the freedom to succeed AND make mistakes. What education is there in failure if the government (the taxpayer) will always be there to bail you out? It is a moral hazard to have people come under the belief that their foolish decisions will be subsidized by the working families of this country. I am embarrassed by your plan and question whether my recent subscription to your paper is worthwhile or if I should seek for better journalism elsewhere. Please refrain from encouraging our politicians to punish 1/3 of Americans (the renters) to help a small percentage of Americans who were foolish. That is injustice of the most punitive kind.
Joshua Richardson
Audio Clips
16 February 2009
Barron's Proposal for the Bailout Money
Ed Finn who is the Editor of Barron's magazine, a financial rag owned by Dow Jones has proposed that the federal government use $250 billion to reduce the principle amount owed by subprime borrowers on their homes. He insists that this is hard to advocate but must be done to move past this episode in our history. I ask, what lesson will those who get bailed out in this fashion learn? They will learn that they can make foolish financial decisions and not feel the consequences of them because the rest of America will pay for it. That is a moral hazard. I wrote to Mr. Finn and expressed my displeasure. Please consider doing the same. My letter is below.
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3 comments:
So I have a question. Regardless of the moral hazard (because I think that the politicians don't care anyways) which would be better for the economy? To allow the foreclosures to rise, which allows people to get out of their overpriced homes and into something cheaper, giving them a little more wiggle room in their budgets, or help them keep their homes that they really can't afford and cause them to only spend money on necessities? I could be wrong (and I often am) but it seems to me that it would be better for all of us if these people just went ahead and lost their homes and started spending more money at Best Buy again and helped to create more private sector jobs. What do you think?
I agree with you. I think the best solution would be to allow the foreclosures to happen. If we fail to do that then we are propping up artificial values on homes. If we allow the foreclosures to happen the prices that the banks get for the houses will begin to communicate what the houses are actually worth. Government interference in that process does not allow for the pricing mechanism to communicate to buyers what a particular house is worth. And, quite honestly, people who are getting foreclosed on are not moving into the streets. They are just rejoining the rental community, which makes up about 32% of Americans. They will continue to have a roof over their heads and they can start saving to try again and buy a house at its true value. There is no God-given right to own a home. 1/3 of us don't. I want to someday, but I'm patient until that day comes.
I'm sad anyone is getting bailed out. Not in this country. We all are accountable for our choices, and when someone comes along to erase our learning process (which sometimes hurts), it leaves us more ignorant and less able.
Sad that the government wants an ignorant, rather than an able people.
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