I couldn’t resist offering a comment on President Bush’s subprime mortgage proposal for my first posting here at LockeSmith. From Forbes:
US President George W. Bush is set to announce for the first time a series of measures aimed at easing the US mortgage crisis marked by rising defaults and foreclosures, US media said today.
The proposals target homeowners who have fallen behind on their mortgages and are the administration’s first official response to the troubled US housing sector which has riled world markets over the past several months.
Among the measures included are a [program] that would allow people to refinance with government insurance if they are unable to pay adjustable rate mortgages, which offer low introductory rates but can rise over time.
For free markets to work, they need to be left, well, free. We had a series of mortgage companies make bad loans to people who should not have taken them in the first place. No money down, interest only, variable notes known as subprime mortgages. This created a huge speculative bubble in real estate. People bought houses way beyond their means, while others snapped up condos hoping to quickly flip them for a profit.
Over time the market always catches up with such risky economic behavior. That is what is happening now. The bubble has burst and housing prices are adjusting back to a more sustainable level of growth. Or so we thought….
Now President Bush decides to step in and spend what could be billions of dollars to “rescue” the market. All this is doing is postponing the day of reckoning.
People made poor economic choices. Why should the rest of us be left to pay the bill to cover their assets?