There's a lot of noise right now about Bush's "bail out" plan for people who won't be able to afford to pay wen their mortgage interest rates reset. Tough to get into it too far without going into politics, but basically the deal that's on the table is nothing. It's really advice, that advice being "it's a hell of a lot better for you, the lenders, to freeze the interest rates than it will be for you to own a bunch of homes on which you've foreclosed." The deal is to give the thing a time frame and more or less give people and the market a 5 year time frame (the proposed length of the freeze) to work it out. It's very important to be aware that there is no bailout as such.
What upsets me is that there will be a bailout. I'm not heartless, I'm not sadistic, but I do think that errors should not be immune from punishment. The lenders were dummies and the borrowers were too. In shorthand, they both believed that there is such a thing as free lunch. Now they've eaten the meal and the check is just about to land on the table. They are the ones who ate, and their ordering the meal and eating it negatively impacted a lot of people. How far will their unwillingness or inability to pay the check impact others? I fear it will be pretty far; far enough that people who had nothing to do with this whole affair will be better off helping to bail the diners out rather than having a big collapse. In which case, we will all wind up splitting the check with the diners, which might be the best solution for all.
It is staggering to expect that I will be subsidizing the jackasses who lived way beyond their means, who used their houses as ATMs, who listened to all of the "savants" who said that the rules have changed and property values will go up on a new slope forever, who made tons of money lending out money to people who they had no business lending to.
My anger over this situation is nearly limitless. I'd love to live in a big house that's beyond my means and have a bunch of blameless saps help me stay in it. I'd love to have made millions selling CDO's to naive saps. But this anger will be used for good. It will fuel inhuman intervals this winter and spring. So next season, when you see the cloud of smoke and the chuckwagon roaring past to victory, take a moment to thank the subprime geniuses who made it all possible.
ps - we got today's pour in. Hooray us.