We’re now less than 24 hours since the Obama Administration announced the shape of the housing rescue package that will be TARP2. The short-sightedness of much of the opposition in their attacks is truly appalling. Many of their politically motivated arguments have been widely debunked by other sources, but the “moral hazard” argument is the one that bothers me the most. Lender statistics show that once a property is 90 days behind, the ability of a borrower to have a successful renegotiation of their mortgage is severely compromised. If we are going to truly avoid some of the foreclosures that are coming, the renegotiation has to begin while the struggle is still somewhat successful — while the borrower is still current, but when they know they are at the end of their rope. That’s how you prevent a property from becoming a foreclosed property.
The people who argue that is an unnecessary “bailout” which punishes the “people who have played by the rules” and have cut back, saved, etc. to be able to live within their means is really a straw man. It needs to go away. The folks who will be helped by this package also “played by the rules.” But for reasons beyond their control… declining housing market prices, loss of work, medical problems… they are fast sinking and will soon go under. There is no “moral hazard” in this program. Speculators and people who got in trouble by living beyond their means are specifically omitted from it.
And what about their neighbors who “played by the rules” and are making it by ok? They will be helped by the fact that the house next door does not go into foreclosure, presenting a potential haven for illegal activity, and dragging down their property values by another 9-10%. Their community will benefit from having homeowners staying in their homes, not being sold to an investor at a bargain price who will bring in renters who may, or may not, value the quality of life in the neighborhood, maintain the house, cut the lawn, trim the trees, shovel the walks, etc.
In short, these carping critics would have criticized Christ for hurting local fishermen and bakers by performing the miracle of the fishes and the loaves. I say we need a miracle right about now.
