The Washington Times has an editorial today, “No Bailout,” explaining why the Treasury Secretary’s plan to freeze mortgage interest rates for people who borrowed more than they could afford is unjust. As the Times points out, if people can’t afford their monthly mortgage payment, and want it reduced, then they should be willing to take out a longer term mortgage (say, 40 years) to offset that lower monthly payment, rather than just getting a cut in their interest rate at the expense of investors and taxpayers.
Martin Feldstein, former Chairman of the Council of Economic Advisors, explains in The Wall Street Journal today why the bailout is a terrible idea that will undermine confidence in financial markets.
I deliberately chose not to borrow more than I could afford when I bought a house. As a result, I bought a little two-bedroom house, and did it on a fixed-interest rate that was initially higher than what I would have paid on an adjustable-rate mortgage, but in exchange was guaranteed not to rise. Now, the government wants me to bail out people who took an adjustable-rate mortgage with a low introductory rate that was certain not to last, in order to buy big houses and fancy cars like a Lexus (I drive a 1994 Saturn). It wants to freeze their interest rates at their current low rate, even though they should have anticipated that it would rise.