For those long time readers, you’ll remember back in October I penned an entry titled
Obama of Sherwood Forest talking about why socialism is the absolute wrong path for any society that values hard work and achievement. I’m the first to agree on the need for social programs to help those less fortunate get back on their feet but at what point do we (the responsible parties) say “Enough is enough!”
The economy's in the toilet…no eloquent way to state the obvious. The unbridled greed of the past few years has caught up with our society and now we pay the price…or do we? Depends on who you are…
President Obama has unveiled a new plan to help people keep their homes provided they weren’t speculators or people who borrowed amounts they could never repay. To that point, it seems the administration is at odds based on the following quote from Ben Bernanke:
Defending the program Tuesday at a Senate hearing, Federal Reserve Chairman Ben Bernanke said it's important to save those who made bad calls, for the greater good. He likened it to calling the fire department to put out a blaze caused by someone smoking in bed."I think the smart way to deal with a situation like that is to put out the fire, save him from his own consequences of his own action but then, going forward, enact penalties and set tougher rules about smoking in bed."I’m horribly disturbed by the above statement as it basically says, “You were irresponsible but the taxpayers are going to save you and then make sure those evil banks/mortgage companies don’t do this to you or some other unsuspecting person ever again”. Where are the consequences for the people who were irresponsible? They will be rewarded with a mandatory rate reduction (as well as principle reduction) while every responsible homeowner will bear the burden of financing this program as will their children and possibly their children. The lesson to be learned is hard work and fiscal responsibility is the surest way to ensure you have nothing…except the bill for saving the irresponsible!
The common argument I hear about this stance is “People need a place to live so stopping foreclosures will ensure people aren’t on the street”. This position has little merit as people who are foreclosed on have the option of getting an apartment they can afford. It’s not their $800K house but it’s an affordable roof over their head. What if the person is unemployed and being foreclosed on? These are the situations where people do need help but not in the form of modifying their loan…they have NO money to pay the loan even if the terms are adjusted. Somewhere along the line, people began to believe homeownership was a right and not a privilege. It’s most certainly a privilege and should be reserved for those who’ve sacrificed, saved and live well within their means…not those who simply said “I deserve this” with no means to repay the loan.
There are plenty of bad guys in the economic meltdown so not letting bank/mortgage companies off the hook but if people had not signed up for loans they couldn’t afford then the banks wouldn’t have been able to leverage this enormous mountain of consumer debt in the form of CDO’s and CDS’. Banks were all too happy to write the loans with little more than a scrap of paper and wink to people who never had a chance of ever being able to afford the payments on the loan once the rates adjusted. The greed of the nation drove a short-term gain in the market at the expense of a generation’s wealth.
I’m also to blame for the economic meltdown…as are you if you’ve ever invested any money in the market. As an investor, my share of the blame comes in the form of the ever-increasing demands for greater profits from the corporations. The thought of continuous growth is a fallacy as all things have finite potential and corporate profits are not exempt. Every quarter the company has to show a “gain” or the stock is deemed stagnant and the price begins to fall (almost immediately). The only option for the corporation is to create new revenue streams which usually come with a trade-off in risk exposure. The old system of dividends for long-term, consistent management has been replaced by the need to see immediate, double digit returns by close of business which isn’t sustainable…a lesson we seem to forget every time the market takes us to school.
So what’s left for those of us who played by the rules? An interest rate reduction? Maybe a principle reduction? Not likely to happen as there is no incentive to help us because we’ll continue to pay and pay and pay holding onto the archaic concept of personal responsibility.
On the topic of responsibility, I’m also disturbed by the comment:
Abess demonstrates the kind of
"responsibility" the president has called for from high-profile financial CEOs, the White House said.
(Click here for the entire article).
The ‘responsibility’ mentioned in the article is actually a redistribution of wealth from the former CEO to people who worked for the company. Taken in the context of the recent infusion of government capital into financial institutions, the seeds are being planted for long-term government intervention in our financial systems with rewards being distributed from the company to the poor….at the expense of the taxpayer.
In this new, modern day Sherwood Forest, those who’ve played by the rules will get to see redistribution…only this time it will be the debt of the irresponsible redistributed to the responsible. Makes emigration to a small Caribbean nation look better every day!
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