Friday, August 01, 2008

Housing Rescue

Bill Bonner writes well and has a delightful sense of humour. His style is blunt, but his insights into human nature are very good. Here is what he said about the housing rescue.

Yesterday, George W. Bush signed the housing bill - in which up to $300 billion is to be spent bailing out naïve homeowners, caddish mortgage lenders and Wall Street geniuses. It is packaged as a reserve against catastrophe.

If everything is hunky dory from here on, only a few billion here and there will be spent. If housing continues to sink, on the other hand, the bill starts toting up. The Congressional Budget Office gave the odds at only 1-in-20 that $100 billion of this money would be spent propping up mortgages.

We're happy to see the federal government taking some dramatic action. It reaffirms our faith in our fellow man - he's an idiot; as we knew all along. And it confirms our opinion of the political class - they're grifters, chiselers and opportunists.

Here is a case where many, many people did dumb things. Homeowners bought houses they couldn't afford. Lenders lent them the money to do it. And then investors bought the loans as if they were good investments. Naturally, the whole thing blew up.

The smartest thing to do would be to let it happen. As quickly as possible. Get it over with.

But "change" is the one thing people most don't want - not when it involves paying for past mistakes. The homeowners don't want to give up their houses. The lenders don't want to go out of business. Investors don't want to lose money. And so they all hope for a miracle. And along comes the miracle worker himself - Uncle Sam.

What makes it possible for the federal government to perform miracles..? They have to create it - out of thin air. Otherwise, they are just taking money from people who didn't make mistakes in order to keep people who did make mistakes from being forced to own up to them.

As we said yesterday, we haven't seen any real estate agents offering to return the commissions they made by selling houses to people who couldn't afford them. Nor have we seen any Wall Street slicks returning their bonuses - much of it earned by sinking people so deep in debt they could never get out. This $300 billion spending bill helps us all forgive and forget the whole thing - by making someone else pay for it.

2 comments:

Gene said...

Amen,

I like GWB but he keeps signing these dumb bills like the economy stimulation package.

I guess Republicans no longer believe in the free market.

This is like getting drunk to avoid pain, the problem is you will still be hung over in the morning.

SIGH

Ron McK said...

They are all the same, Gene.
There are no presidents in the Kingdom of God.