The immorality of the housing bill

The housing bill that just passed Congress is a piece of immoral legislation. There are two reasons for this:

1. The bill bails out Fannie Mae and Freddie Mac. These are private corporations. When they were making tons of money, private investors made a killing. But one of the most important aspects of free markets is that companies who make bad bets need to be punished by the market for making bad bets or being reckless. And Fannie and Freddie were completely reckless. When times were good, they kept their profits. Now that their reckless has been exposed, they want the American people to bail them out.

This is wrong. The American people should be be forced to bail out private companies. Companies need to be help responsible for their actions and not have the American people bail them out when things go badly.

2. The bill bails out people who took out bad loans. Like Fannie and Freddie, a lot of people took out bad loans. In some cases, I’m sure people were misled by loan officers. But like like anything in life, if something is too good to be true, it almost surely is. Now President Bush and Congress want to protect some of these people from their bad decisions. This is backward. The way to keep people from being imprudent and taking imprudent loans is for people to be forced to deal with the downside risk (as well as being able to enjoy the upside benefit of making a lot of people in things go well).

This is wrong. The American people should not be forced to bail out people who took out imprudent loans.  People need to held responsible for their actions and not have the American people bail them out when things go badly.

There’s one more problem with this bill–it probably won’t have much of an effect.

So let’s review–Congress and Bush come up with a law that protects some people from the results of their bad decisions. The bill currently has a $300 billion price tag. And according to some experts, it won’t have much of an effects. Great work guys! It must be an election year.