Friday, December 14, 2007

The Housing Balloon

The Senate OK'd a bill that would 'help' thousands of home-owners who made the brilliant decision to use Adjustable-Rate and other exotic mortgages. Why do they need this so-called help? Because these exotic mortgages have a bomb built into them. They start their life out as low-interest loans, and after a few years of getting payments applied to them, their interest rate explodes, leading to higher payments. Additionally, the House has already passed a version of the bill, which means that now both sides of Congress will need to hash out the differences and re-vote before sending it onto the President.

Let me be up front with everyone: I do not like this bill.

I firmly believe it is both unconstitutional and goes against the fundamental concepts of the free-market upon which our society is built.

How can I say this? Is this some evil grinch in me that wants to see people lose their homes? Of course not. I feel bad for them. A little at least.

Yet, these people willingly chose to enter into those loans. They KNEW that the interest rate was going to blow up on them, yet they went into the loan anyways. On the other side of things, the various financial organizations which made those loans also knew that once those rates increased, then the borrowers would be unable to make the loan payments.

How exactly am I supposed to feel bad about people who make informed decisions, even if those informed decisions are not in their long-term best behavior?

Why exactly should our government be trying to help out either people or business who made decisions on their own, about their own finances, and are now effectively in that proverbial lake?

Democratic Senator Charles Schumer opined this about this particular bill:
be a source of salvation for those families who were tricked into unaffordable loans
Do what? How exactly were these people tricked? I don't know what type of loan they signed, but my mortgage has the interest rate, including the fact that it does not change, clearly written on the contract I signed. There is no way that these families were tricked into purchasing such a loan--to imply that is at best to be trying to hoodwink the public into accepting another government handout to cover people's own stupidity. And if they WERE tricked into an ARM, by the mortgage lender not disclosing the fact that it was an ARM, then there are already statutes on the books to deal with fraudulent lending practices.

No. This is merely a bailout of people too stupid for their own good, companies too greedy for their own good, and the Federal Reserver which is responsible for it all, by forcing us to go to a wishes-backed currency rather than the gold standard.

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