November 7, 2007

The Rant Corner
Up in the sky! It's Bailout Man!

Stew Shearer | contributing columnist

As most Americans who follow the news and especially the housing market know, things have been a bit messy the past few months. Thousands of people who purchased their homes with subprime mortgage loans, which sport changing interest rates, have found themselves unable to pay their bills as the prices of owning homes rose, leading to the worst housing crisis in recent memory.

The causes behind this flux are numerous - some consumer advocacy groups argue that consumers were pushed by money hungry companies to accept loans they didn’t fully understand and, to some extent, I believe this could be true. I would never put the various lenders in America above trying to make a quick buck by passing loans off onto people who could not really afford them or to people with bad credit that would prevent them from getting any other kind of loan. It is a shame that the various lenders, paranoid in the aftermath of this snafu, have been making it more difficult for honest people who pay their bills and have good credit to get the money they need to buy homes. Even in lieu of this, I cannot condone the kind of government bailout that is being proposed and will likely pass in the upcoming months.

The government has begun looking into aid for citizens who were unable to pay their subprime loans and as such might have to foreclose on their homes. With nearly a million people at risk of defaulting on their loans, this swooping in of the government to save these saps could cost the rest of America nearly $120 billion. That’s $120,000,000,000.

A lot of people may gripe about how much Iraq is costing America but even for those who disagree with that conflict, it can be said that it is genuinely important that our soldiers have the best equipment we can give them. How can anyone justify charging the American taxpayers that much money to rescue people from a problem that basically stems from their own irresponsibility? Put aside the idea that lenders may have been less than forward with the risks of these kinds of loans. One would think that when signing a contract that results in you owing something hundreds of thousands of dollars that you might take a moment to read the fine print and perhaps even consult someone aside from the man in the bad suit with the fake smile who’s holding the pen out to you.

Furthermore, Americans are notorious for being more than a tad too consumerist. For instance, the poor in America oftentimes have more than the average citizens of many other countries. The U.S. Census Bureau reported in 2002 that:

• 67% of America’s poor have air conditioning
• 97% have a color television; over half possessing more than one
• 62% have cable or satellite television

Rather than charging the rest of America for the mistakes of a few, we should ask them to turn off the air conditioner/heat, cancel their cable, and maybe use the money they save on electric and television-related bills to help pay their mortgage.

However, even this would not solve the entire problem. There are simply some people who could not have afforded these loans and should not have taken them out, and the last thing we should do is bail them out.

Let me use an example from my own life to illustrate this point. When I was 17, I spent $500 on a concert ticket. I was supposed to have front-row seating, but instead a few days before the concert I received a phone call from the company saying the best they could do was to put me in the 32nd row. I received a meager $75 refund. Discounting the fact that $500 is an insane amount to pay for any live show, I learned a damn good lesson from this experience. In the excitement of the moment I spent way too much money on something worth only a fraction of what I paid. Was it a great show? Yes, but later on, when I could have used that money, it wasn’t available and I had to live with the fact that all the people seated around me had paid about 10 times less then me for virtually the same seat.

People need to learn to stop spending money they don’t have. The people who are now defaulting on their loans should be forced to sort out this situation themselves so the next time a fast and easy solution comes along, they will have learned enough to look for the strings attached. By bailing them out we not only place an unfair burden on the rest of the country that did not make this mistake, but send the message that its okay to do stupid things and especially to live outside our means. Be as irresponsible with your money as you want! The government will be there to hold your hand when it bites you afterwards.

It may be a bad situation and a lot of people stand to lose a lot of money, but honestly, as I see it, all the people involved could have chosen to act differently. The lenders chose to give people with credit delinquency loans and those same people signed on the dotted lines despite the fact they might not be able to pay up when the bill arrived. It may be hard on them, but they dug this hole and they can climb their own way out of it. As for the economy, it may suffer. The housing market won’t bounce back from this overnight, but it will recover and consumers will be smarter for the experience.