Should We Bail Out People Who Made Poor Borrowing Choices?
Senator Charles Schumer says we should:
Sen. Charles Schumer urged federal regulators Wednesday to do more to help certain homeowners struggling to make mortgage payments.
The Democratic senator from New York made his plea in a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke - two men at the forefront of efforts to make sure the credit crunch that has rocked Wall Street doesn’t undermine the economy.
Schumer asked Paulson and Bernanke to support a plan in Congress to provide $100 million to nonprofit housing groups to help troubled subprime borrowers - those with blemished credit histories - refinance their homes.
Those borrowers have been hardest hit as interest rates have risen and home values have weakened. As a result, foreclosures and late payments have soared. The credit crunch, which started with these homeowners, has spread to other borrowers.
The problem is that a) that $100 million isn’t going to go far once those non-profit groups eat most of it up in administrative fees and b) giving people who make poor credit decisions money to bail them out is just going to delay the inevitable. Giving these people money to get another mortgage that they likely will eventually not be able to pay off either isn’t going to help anyone.
And it’s going to cost taxpayers $100 million.
There’s no government fix to the current woes in the housing sector. Better to just ride it out than protract it with well-meaning but largely ineffectual band-aids.
