What's Wrong With This Subprime Picture?
Dictionary.com defines socialism as
Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.Under that definition, George W. Bush just socialized the subprime mortgage problem. Wait...I guess not. He said that his plan was purely voluntary.
The Deseret News did a good job of calling BS on Bush's "voluntary" plan.
To a politician, the most difficult thing in the world is to acknowledge that the best solution is for government to do nothing at all. When it comes to the mortgage lending crisis, President Bush has shown he, also, lacks this ability.It's interesting that
He said Thursday the mortgage industry solution he helped draft was a voluntary, private-sector solution. We doubt many mortgage lenders feel the deal is truly voluntary. Whenever the president summons people to the White House to work out a deal, there is always the unspoken threat that if they don't do as told, government will impose a deal upon them.
...administration officials became convinced the tide of foreclosures threatened by the mortgage resets represented such a severe threat that a more sweeping approach was needed. They opted for a proposal that was along the lines of a plan put forward in October by Sheila Bair, head of the Federal Deposit Insurance Corp.Without realizing it, instead of solving the problem, the Bush Administration has perpetuated and exacerbated it. People make stupid decisions because they know that a significant number of the consequences of their stupid actions will be borne by someone else. Starting with Franklin D. Roosevelt's ill-thought-out Social Security plan, Americans have become conditioned to think that, when the going gets tough, someone else will bail them out.
Bail outs should be rare, and they are not a function of the federal government. But the federal government is constantly involved in bailing someone or other out, usually after the bailees take advantage of another perverse government incentive.
I like better the approach of Zion's Bancorp CEO, Harris Simons.
The pain caused by the subprime mortgage mess likely will get worse, and lending institutions need to learn to say "no" to people who cannot afford mortgages, according to the head of Zions Bancorp.If government gets involved, how will that help the fundamental problem? It won't. It will make the problem fundamentally worse.
"One of the responsibilities that we have is to provide products that we can be proud of and that actually help customers become stronger, not weaker, and sometimes the best thing we can say to a customer, for their own sake, is 'no'."