Wednesday, December 03, 2008

Prolonging the Suffering Housing and Financial Markets

Anyone under the delusion that FDIC Chairman Sheila Bair's ideas regarding helping homeowners who took out mortgages that they couldn't pay make sense should read this editorial from the Wall Street Journal. Once the reader understands from the editorial that Ms. Bair's program assumes that roughly a third of those receiving help will eventually be foreclosed on anyway, they should then also consider the following and get angry:

All that is being promised or discussed regarding using taxpayer money to bail out irresponsible mortgage payers is having and will have the effect of prolonging both the softening of the housing market and the recession. The housing bubble having burst, the housing market is now seeking to find its bottom. Once that bottom is found, prices will stabilize and eventually recover. However, the bottom will not be reached or known as long as the government entertains ideas of falsely propping up prices by enabling people to stay in homes that they cannot afford. Thus, the goal of eliminating short term pain for a relative few is helping guarantee the continued financial instability of the entire country.

Bureaucrats like Ms. Bair are not capable of understanding that.

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