You got to be kidding:
Greenspan Urges U.S. to Help Those Facing Foreclosure
I experienced first hand the so called “abuse” of lenders. You want to know what it is? First, they don’t want to spend a lot of time explaining how a loan works. You HAVE to do your homework. Second, they want to convince you to buy a bigger house. If you follow their lead, they will help you to lie in your loan application.
During the “boom” years, I had a chance to buy a home twice and refinanced each house once.
My first loan was a mess, mostly because I didn’t do my homework and therefore had no idea of what I was doing. It was a 100% financed loan (I suspect it would fall into the “sub-prime” category) and it was basically a 3 year variable rate. I lost my job soon after and almost lost the house. I refinanced it as soon as I could. I sold that house when I moved and bought another without a problem. The lender was pissed that I didn’t want a bigger house but I simply told him to back off and that was it. I later refinanced because the rates were so much lower that it was worth it.
So I understand how people fall in these traps… but I can tell you with 100% certainty that this is completely avoidable. To compare this with a natural disaster is a total and complete lunacy.
What do you think will happen if the government hands out this kind of help? Do you think these people will say “wow that was close! Let me read some material so I don’t make the same mistake next time!” or do you think they will just say “good! I knew I didn’t have to worry about buying more than I could afford. Now let’s go to Best Buy and get that 42 inch plasma! Pay only in 2010!”
Of course I understand this utilitarian view that the economy will suffer more if people default, and that mortgage based securities will fall all over the market and bring my retirement savings down, etc, etc.
But listen, for once we should all pay the price for that. If my retirement saving goes down, I will find the stock funds that bought those damn MBS packages and drop them. This way they would learn their leasson too!
We shouldn’t be talking about freezing rates or handing out money. We should be talking about having huge government ads and manuals being print at this moment telling people how stupid they were and where to get information so they don’t do it again. That’s it!
I see this kind of crazy mommy government thinking as the main threat to the world economy, especially the industrialized countries.
Capitalism works because is logical and deterministic. People only understand their mistakes when they pay for them. To think otherwise is to profoundly ignore human nature.