Boss Hog Bail Outs!

By
Real Estate Agent with StoneHouse Realty, Inc

 It's a political year and I've been hearing a lot on Talk Radio regarding the "what to do about the real estate market."  Many folks think it's a stupid idea to bail out some "idiot" homebuyers who stretched their budgets beyond anyone's wildest imagination.

But as I watch a parade of curious arrangements made to rescue foreclosure-tattered money hogs, I don't hear any of the same angry tone of "I'm not paying for someone else's mistake."

The Federal Reserve has taken bold economic resuscitation steps these past weeks -- an emergency rate cut of 0.75% and another 0.5%. These are the boldest move by our central bank since 2001 or 1989, depending on how you count.

Guess who wins? BANKERS (who thrive on cheaper money) and FOLKS WITH DECENT CREDIT (who get to borrow cheaper).  We can throw in a few mortgage borrowers who might be able to make an adjustable house payment or two.

But guess who pays? THOSE WHO DIDN'T GAMBLE (Like good people who save in, say, money market accounts) and THOSE WHO DIDN'T STRETCH THEIR BUDGETS TOO THIN. What did they do wrong? What message do they get? (Take risks, or see your income whacked!)

In theory, I'm all for the enforcing the harsh marketplace lesson: Bet makers must pay the price when the gamble goes belly-up. Small fry or Boss Hogs.

In practice, though, this noble notion proves to be blatantly unfair.

The fat cats too frequently get rescued, whether through direct financial boosts or by the back-channel winks and nods.

Funny how Countrywide Home Loans found savior Bank of America just in the nick of time, no? It's curious how investors show up at the key moment to prop up market-critical players: Citicorp bankers or Merrill Lynch traders or MBIA bond insurers.

Was this pure capitalism, with opportunists sensing a bargain in a wounded company? Or were there quiet nudges behind the scenes, perhaps, to place idle cash where it could help the most?

If you've got no problem with low-key negotiations stabilizing skittish financial markets, then what about that family that made a huge (but likely honest) mistake with a home loan?

Please don't tell me about what amounts to toothless federal mortgage aid plans in the works. And the freshly minted D.C. stimulus package won't provide much aid to those who can't make mortgage payments. If Congress and the White House can quickly agree on such a plan, it's not impossible to create an equitable mortgage rescue scenario that would separate the honorable-but-cash-strapped homeowner from greedy-but-losing speculators.

 Plus, if you're got a significant nest egg in stocks, don't cry about borrower bailouts either. Just imagine the extra damage your net worth would have suffered if the Fed hadn't fired the heavy artillery.

Folks, it's time to be fair. Suggesting that troubled borrowers get a significant break or two, or even an outright gift to stay afloat, does not mean you're an idiot. Or a socialist. I SIMPLY LIKE CONSISTENCY. Personally, I think we should cut the life lines and let the market correct itself.  It will be hell in the short-term but stronger in the long run.

Clearly, most of us don't want our financial markets shattered by the collapse of ill-managed corporate giants. (Don't business schools teach MBAs what a good mortgage is?) I personally would prefer bailouts, though, where the chief moron who approved the gargantuan loan gaffes does not get multimillion-buck golden parachutes they're escorted out the door.

So, if we're cool with these bailouts for the money hogs - from Fed rate cuts to secret side deals - then let the small fry share in our self-centered refusal to let corporate titans go under.

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