After reading tons and tons of rhetoric and election year ideas about how to “fix” the mortgage and housing markets with a variety of government sponsored schemes, I have come to the strong conclusion that the federal government should in fact do absolutely nothing.

While a number of folks are undoubtedly in a tough spot due to actions they took over the past few years, perhaps leveraging themselves into too much of a house, not performing their personal due diligence on long term affordability levels and market history, or, from the side of lenders, not requiring a sufficient down payment, failing to check the true income and balance sheet of its borrowers and or performing their own due diligence on the extension of the housing markets beyond historical norms, there is absolutely no reason the federal government should enter the business of subsidizing foolishness.

This may seem harsh, but in reality it is wholly just and, in fact, quite caring. There should be no risk shifted from those who made poor decisions to those who avoided undue risk, worked diligently to save and avoid debt, studied history and understood the market processes. Many politicians are currently calling for this shift of risk. Perhaps they see the federal government as an endless supply of capital for whatever projects or policies they want to pass. But the fact of the matter is, the federal government is simply the collection of taxpaying individuals. Passing risk to honest taxpayers is unjust and wrong. It hurts the future in many ways: rewarding poor decisions, encouraging future bad choices via the setting of bad precedence, injuring individuals who acted with wisdom, and generally disrupting the process of allowing reality to work properly.

Whether you believe in large government or not, whether you think punishing tax payers to bail out over leveraged home owners is a great idea or terrible, whether you are in trouble or not, we should all be able to agree that disrupting the fiber of rational and just decision making in pursuit of short sighted political gain is not good or justifiable.

Anyone who cares about the foundation of the world we pass on to future generations and justice in general should be firmly against the government intruding into the process of allowing the market to adjust to fundamental reality. To put it simply: there ought to be no bail outs, regardless of how politically popular our leaders may think they are.

Those with a sense of reality should join the fight in opposing massive intervention for the benefit of faulty decision-making.

I must also add, that I completely agree with Mish, the Federal Reserve should absolutely not be granted more powers of oversight, regulation and general shenanigans over the total financial economy, such is now being advised by the clearly lunatic U.S. Treasury. Giving more power to the agent that played the biggest single role in getting us in this mess is just baffling. Hopefully better judgment steps to the forefront.

Filed under: Politics, Social Mood, Economics