[ExI] A new low

[J. Andrew Rogers]

On Dec 21, 2007, at 2:50 PM, aiguy at comcast.net wrote:
> The goals of the loan bail out problem are four fold as I see it.
>
> 1. Help customers who were duped into dubious loan terms from losing  
> everything by helping them obtain conventional loans even though  
> their credit may remain borderline.


Duped?  It was people who exercised poor judgement on both sides of  
the deal.  House flippers and other assorted idiots applying for loans  
they clearly could not afford (and willful ignorance is no excuse  
before the laws of economics) and lending companies underwriting  
objectively dubious investments (and then selling packages to other  
companies who did zero due diligence).

Almost everyone that got burned deserved to get burned.  The lesson is  
not supposed to be "we'll bail you out every time you do something  
stupid with your money".  What next, is the Federal government going  
to cover gambling losses in Las Vegas?


> 2. Prevent runs on the banks that made too many of these loans and  
> keep the bank themselves from defaulting and prevent the federally  
> insured deposits  from having to paid by the government.


Allowing the banks to get burned would be an excellent outcome.  Short- 
term pain for long-term benefit that would ultimately cost the economy  
far less.


>  3.  Prevent the real estate bubble from collapsing by too many  
> homes being repossessed in too short of a period.


This would be a desirable outcome.  It would allow people with sound  
financials to buy a home that otherwise could not because of idiot- 
inflated house prices.  There is no right to have one's house  
appreciate in value (or at least not lose value) every year, nor would  
it be the first time housing markets have deflated in most people's  
lifetime.


> 4. Prevent the US economy from entering a recession/depession due to  
> 1, 2, and 3.


Get some perspective, mortgages and related are a tiny percentage of  
the economy.  The day-to-day movement of the stock market creates and  
destroys orders of magnitude more wealth than the worst case losses of  
the entire sub-prime mortgage fiasco.


> And remember the last time major banks collapsed in the United  
> States we had a little thing called the Great Depression.


Completely unwarranted breathless hype.

J. Andrew Rogers