Suck it up

Many Things

By Jim Flanagan

(Updated: Wednesday, April 16, 2008, 6:05 PM)

Protectionism and risk

What really bothers me about what the seat of our national government is doing about the present economic situation is the tendency to bail everybody out, from Bears-Stern on Wall Street to the people who went for the sub-prime loans, knowing that the low interest rates were introductory and were to increase in the future.

Traditionally, if you take a business risk and it goes bad, you suck it up, and if necessary file for bankruptcy protection. I do not feel comfortable rewarding bad judgment, especially when done by investors and speculators, combined with commission-hungry salespeople who pushed people into bad loans because of the reward of kickbacks.

Those protectionist/bail-out solutions are an indication of the difference between liberal and conservative economic solutions. The liberal gets all emotional and wants to immediately throw money at the problem. The conservative wants to take time to think of the best long-run cost-benefit ratio solution. A simpler solution from the get-go would have been to fire or demote the federal employees who were supposed to oversee those types of transactions (could have used random audits like the IRS does), and then to fine those companies who violated the ethical boundaries of those types of transactions. That at least would discourage such conduct, or lack thereof, in the future.

I have no problem with helping the consumer and loan companies (or those who bought the contracts without due diligence) negotiate a fair disposition, so long as those consumers were real home buyers and not speculators and investors. But, even then, I would not want to reward those who greedily took the lower interest and then sucked up the rest of the equity with a refinance or equity loan that put them in the foreclosure position. To do otherwise, my friends, just encourages bad judgment and is a socialistic solution.