Friday, April 13, 2007

Bailout and the law of unintended consequences

It seems no matter how I pencil out a possible bailout of the cascading mortgage defaults, it ads up to a reward to the banks and lenders. They perpetuated this mess, turning a blind eye while dubious mortgage brokers pushed predatory loan packages on anybody with a pulse.
You know who is going to pay the bill…you and I.

Here is yet another reason that government meddling is a bad idea. Better to let the market sort it out and the banks that stood by and let it happen can go hang.
"Still economists say bailout could have the effect of causing more defaults. "If the plan is to pay off loans when people quit, then I plan to quit paying my loan," says Michael Englund, chief economist at Action Economics.
What's more, some economists say a bailout could encourage more risky lending in the future. "A bailout would validate what some of these lenders and borrowers did, which we now understand was reckless," says Carl Tannenbaum, president of the National Association of for Business Economics.
"I don't think that's what we want to do."


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