The housing boom drew a lot of speculators and carpet baggers -- freeloaders who wanted to make a quick buck during the gold rush and cared little or nothing about the long-term effects on the housing market. They took none of the risk, gathered all of the profits, and scampered out of town just before the sheriff showed up.
They partied and left the American homeowner to pick up the tab.
President Bush has said that a bailout is out of the question, noting, "A federal bailout of lenders would only encourage a recurrence of the problem." This is certainly true. Bailing out the lenders would simply lay the burden on taxpayers and provide the carpet baggers with another opportunity to pillage.
The President did reach out to some distressed homeowners -- those with good credit histories who could probably pull themselves out of their current crises with a little help from the federal government. The FHA (Federal Housing Authority) will be given more flexibility to assist homeowners who have subprime mortgages. Homeowners may also be spared having to pay additional taxes in the event that the lender forgives a portion of their debt. Perhaps this will encourage lenders to work out reasonable solutions with homeowners.
But what about all the other consumers -- hard-working American families who are too deep in debt to be saved? What about the children who are going to be uprooted from their neighborhoods and the school districts where all their friends go? Government officials, lenders, and people who have not been victimized by the shoddy lending practices of the last decade are quick to judge. After all, they are not the ones paying the price. The people who are suffering are the ones who usually suffer in these situations -- consumers. These are the people who were sold ARMs (adjustable-rate mortgages) that ended up costing an arm and a leg. They were told that they could refinance before the rates went up or could build higher credit scores by making their payments on time and then refinance with a low interest rate mortgage later.
Then, the bottom dropped out of the housing market, making it nearly impossible for these hard-hit homeowners to refinance. Some of these loans even came with stiff prepayment penalties to further discourage people from refinancing. These folks were led down this path simply because they trusted an "expert" in a fancy suit with a silver tongue who failed to warn them of the looming trouble and the risk they were taking. Where are these smooth talkers now? Probably out of work and seeking more fertile fields to ply their trade. They turned the American Dream of Homeownership into a nightmare, but they certainly aren’t the ones having to wake up to it.
Instead of letting them off the hook, they should be forced to take ownership of the problem they created. Instead of waiting around to see whether the federal government is going to bail them out, they should be actively pursuing those they led astray and offering them real solutions that can help these distressed homeowners regain their financial footing.
