Which Country Is This?
Today, the President proposed that the government nullified contractual agreements, an action that obliterates the rule of law. The measure he introduced relieves home owners from paying interest on adjustable mortgages upon rate-reset as required by the mortgage contract.
Why stop there? If he wants to be popular why not exempt borrowers from any interest payment? Why not exempt them from principal payment, too? Why not just take rich people’s money and help bad-credit owners build larger houses? Why not become Hugo Chavez?
Update: The ASF claims that no contracts will be violated. It says that “existing subprime securitization operative documents generally authorize the servicer to modify the loans for which default is reasonably foreseeable” (page 9) and “agreements should be interpreted, to the maximum extent possible, to authorize the servicer to take the actions” including equating the standards “default is imminent” and “default is reasonably foreseeable.” Some lawyers are going to have fun.
Update2: In the above, I condemned Bush’s housing bailout in moral terms: it’s a violation of contracts, the rule of law, and a cheep populist ploy to give away another’s wealth to those who haven’t earned it. I decided to read the conservative blogs to see if contracts, law, rightful ownership, and expropriation were among the terms employed to criticize these measures.
On National Review Online I found a discussion of the economic impact and comments about ‘who it helps’. It gets better when Michelle Malkin asks about whether we are punishing the rest of us (expropriation) and equates Bush to Hillary here. But it sinks to a low when Kudlow, while properly rejecting the alleged economic benefits, supports it as politically necessary.
Red State has several articles along utilitarian/consequentialist lines but little from a moral perspective. Patrick talks about moral hazard. Cornwall talks about allowing the free market to work on the “LockeSmith Blog”. Glen Reynolds could only dig up this link. Berlau of the CEI wisely points out that if the “plan is truly voluntary, it’s unnecessary” but mostly talks about contract violation in Hayekian terms of spontaneous order.
The above writers make important points. However, few address the moral issue directly. Some hint at the moral issue; others mention it in passing. Few make it the central point of their criticism. The simple truth is that a mortgage is a contract, there are laws, and the individuals involved have rights which aren’t trumped by the needs of others. Perhaps it’s early but I don’t see conservatives taking a principled moral stance against what is intended to be a violation of the rule of law and a violation of rights.
Update3: Epstein is an exception. Note his reliance on self-responsibility and rights vs. the evil of expropriation and punishing the innocent. Compare that with the "free market" TechCentral article by Kling which purports to be about responsibility but is really about Kling's view on who deserves to be punished including real estate agents with Rolexes!