Monday, October 06, 2008

Why I Don't Like the Government Bail-Out Plan

Economics 101.

Don't issue loans to people who can't afford to pay them back. Eventually, you will run out of he ability to issue loans at all.

The problem was that since 1992 the mortgage industry under government mandate, and to pump up numbers of the less-advantaged, artificially accepted people with bad credit or no credit using various lending schemes. This has produced a number of badly backed mortgage loans, that are not going to produce any income.

If you want to help people who can't afford a home. Teach them how to SAVE. Teach them a skill, in order to produce wealth. Support programs that build homes for underprivileged or handicapped people (rather than preserving animal habitats). Support more qualified organizations, like the church or humanitarian organizations, to do what they do best: helping people who can't help themselves. And support families along with medical and community organizations in order to help the mentally incapable. (They shouldn't be given loans anyway without a proper co-signer.)

The government should support these efforts, not run them. The government is only good at punishing evil, and protecting and encouraging the right behavior in society. It is good that the government says that housing-discrimination is wrong. And it is good for the government to enforce laws that protect credit-worthy individuals from being either priced out of the market or being denied loans for reasons other than credit-worthiness.

However, the government is lousy at enforcing wealth and prosperity.

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