The Subprime Bailout

Lucy and Desi have been gone for a long time. They live on only in our memories and the magic of TV reruns. Just about everyone remembers Ricky Ricardo exclaiming "Lucy! You have some 'splainin to do". I wish someone could 'splain the logic behind the proposed sub-prime bail out to me.

Here is the basic situation as I see it. A lot of people borrowed money under terms they could not afford to pay back. Now the federal government wants to come in and freeze the interest rates on these adjustable rate loans for five years. Why?

I do empathize for the families who are going to lose their homes because they can no longer afford the payments, but why as a society do we refuse to let people take responsibility for the decisions they have made?

I would grant concessions to lower income families. By securing a loan, any loan, they were given the opportunity to live the American Dream and buy a house. But I really do not understand why we are coming to the rescue of people who bought too much house when they could have had a mortgage they could maintain on a smaller or older home.

Where are the rewards for the homeowners who took the time to borrow within their means and consider potential adverse consequences of rising interest rates or declines in the housing market?

Lenders did not force people into these deals, the public screamed for them. Why should they have to hold the rates now when they should be getting higher incomes? At least the government is not going to be shelling out my tax dollars for this. The cost of this will be the responsibility of the lenders.

This should not be a political issue in my mind. Candidates, are you listening? I am an Iowan and I vote. If you want to talk about it call me at home. You already have the number. Someone from your office calls every day asking for money.

I Love Lucy doll by Lola_Gainsborough   

Comments

[Brett Trout]

Right on target Art. These people are not "losing their homes," they are merely having to sell extravagant homes they did not have the resources to buy in the first place and buy a home within their budget.

If interest rates had instead dropped, and rewarded these people with a windfall for their stupidity, would the government be taking this windfall and distributing it back to the people who did the right thing? the people who are now paying for the mistakes of those who overbought?

The craziest thing is that I have not seen one of these people take responsibility for their own avarice.

[Angie]

Well said! My husband and I bought our first home during all of the madness, and we relocated in order to find a home that we could comfortably afford with a 30 year fixed. Friends who "upgraded" to a bigger home thought we were nuts when we could "qualify" in our old neighborhood with an interest-only 3 year arm. Those same friends are now crying foul because their home is not worth what they owe on it and the rates have adjusted to the point where they can't make their payments without giving up some toys. They are taking no responsibility for their poor choices. We, meanwhile, have also seen a dip in the value of our home, but it doesn't matter - we can afford our payments and we are here for the long haul.

[Art Dinkin]

Thanks for your comments. It is good to know that I am not the only one doing a double take on this.

Angie, I am with you. While I did refinance a couple times when interest rates kept falling, I have always favored a fixed rate loan (even though it "cost" me some basis points for a while). Like you, we don't worry about the value of our house as we don't plan on moving.

Brett, This is not the first time our government has rewarded those who made the easy, but ultimately incorrect, choice. On another note, I was going to crack a lawyer joke about your decision to use the word avarice but then I looked it up. Proves you have a great command of the language. They must teach avarice at law school... :)