One Bad Idea

I am not sure if there is any greater argument against something than the fact that Jesse Jackson is for it. In this case he argues for the mortgage freeze, although he says that it is not large or early enough. He is wrong on both counts. Here is the stupidest part:

But for the two million homeowners who face foreclosure over the next year because of the subprime mortgage crisis, their New Year's hopes rest not with themselves, but with policy makers in Washington and the investment community on Wall Street.

Hello, they are not facing foreclosure because of the crisis, they are the cause of the crisis. My sympathy goes out to anyone who loses their home, but this was the result of poor decisions, they are not the passive recipients of over people's actions.

Jackson continues:

Many of the victims of aggressive mortgage brokers were single women, seniors on fixed income, young couples, Latinos and African Americans. They live in every neighborhood in every one of our major cities, and elsewhere. In one block alone on West Madison Street in Chicago, every one of the homeowners is in default on their current mortgage terms. In neighborhood after neighborhood in Chicago, foreclosures have soared to more than 50 per square mile.

Of course since there are 640 acres to a square mile, we are conservatively talking about thousands of homes, from which those 50 are from. These houses are not going to go empty after their current owners lose them, others, specifically the poor that he is worried about will have to opportunity to pick them up at bargain prices, that they can hopefully actually afford.

Amen Brother!

My Milton Friedman side has been rather insulted by the talk of bailing out people for being idiots. This is capitalism, Darwinism applies, I don't want my tax money going to people on the basis that they are stupid. In any case the WSJ has a great editorial on this subject today. I couldn't agree with it more.

A taxpayer bailout of distressed homeowners would be expensive, unfair to the vast majority of homeowners and renters who have made prudent financial decisions, and set a troubling precedent that would invite reckless behavior in the future. What's more, a bailout will not stop the inevitable correction in home prices, and is unlikely to prevent the associated economic repercussions.

The primary argument for a taxpayer bailout is based on a myth -- that subprime borrowers are falling behind on their mortgages because interest rates on their adjustable rate mortgages have spiked, making their monthly payments unaffordable. In fact, the vast majority of delinquent subprime borrowers are still paying introductory teaser rates (about 8% on average, a below-market rate for borrowers with checkered credit histories). In other words, for most of these borrowers, their monthly payments have not yet gone up.