Opinion: Shielding risk-takers from risk
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One of the more nauseating parts of the housing bust is the New York Times editorials that the ‘crisis’ has spawned. The Times’ typical justification for government action goes something like the following opening paragraph in Monday’s editorial, ‘Keeping Americans in Their Homes’:
The nation’s housing market is in a deep recession, and further declines in new construction, sales and prices are imminent. By the end of next year, falling home values, combined with rising payments on adjustable mortgages, tighter lending conditions and, in all probability, a faltering job market, will have unleashed mass foreclosures — estimated at several hundred thousand to two million — unless something is done to help keep Americans in their homes.
To me, ‘further declines in new construction, sales and prices,’ ‘falling home values, combined with rising payments on adjustable mortgages, tighter lending conditions,’ and ‘mass foreclosures’ sound like a market correcting itself after an unsustainable bubble. But this is the same editorial board that in September decried the ‘absolutist notion that self-policed markets self-correct.’
Let’s get one point out of the way: High foreclosure rates should not be held up as Exhibit A if your argument is that free markets cannot correct themselves and that more federal regulation is needed. Crude as it sounds, people losing their homes is market correction, and after-the-fact federal intervention would help prevent real estate values from their march downward. This market correction just happens to involve people losing their homes, a sad and understandably touchy subject that engenders free-market distrust.
But the N.Y. Times’ editorials don’t just make repeated calls to rein in the more unscrupulous mortage lenders and thus help prevent future housing bubbles and busts. Rather the paper has lapsed into consistent advocacy for ‘keeping Americans in their homes’ — that is, getting Washington to rescue just about anyone at risk of mortgage default or foreclosure. (Click here for yet another example). It’s as if the paper thinks homeowners who took a risk on a highly volatile market are entitled to hold onto their houses — even if they can’t pay for them.
Worst, the kind of federal intervention (Monday’s editorial calls for revising bankruptcy laws) would hurt those of us who chose not to take a chance on an overheated market that subsequently cooled, a widely shared feeling summed up by a Northern Californian who left a comment on the Times’ website:
We’ve been priced out of the hyper-inflated Bay Area housing market for years. I can’t tell you how irritating it’s been to live among the entitled ‘home equity’ spendthrifts and real estate hype-agents, and now, to read about bailout programs to ‘rescue’ the same so they may keep the over-priced homes they could ill-afford, and all to be funded by my taxes.
Here here.