Let's look at the bigger picture. You won't get any argument from me that
housing is subsidized in the United States via the tax code and Fannie
Mae/Freddie Mac. So I'll just go ahead and acknowledge the general truth
about your contention that the government interferes in the free market for
housing. Unlike you, I don't have a problem on principle with such
government activity. However, that belief is not principle is a sideshow to
the matter at hand.
Is the meltdown in sub-prime loans defensible by saying, "The government
encouraged us to do this?" No. The financial industry is not a herd of
sheep. Is the insanity of a market that bet there would be no significant
housing market corrections in the next few years defensible by saying "The
government subsidized it." I don't think so. Anybody who plays in finance
knows that corrections are like earthquakes -- unpredictable in specifics,
but all too reliable. Is the moral abrogation in making predatory loans
defensible by blaming government? No way. When we take unfair advantage of
others, we are wrong, even if the victim was wrongly motivated by greed and
even if those in authority wrongly encouraged us.
Those who are quick to blame home buyers for accepting predatory loans
should be at least as fast to blame the financiers who made them -- and far
faster to demand restitution. Those people were conned; the victim of a con
deserves to lose something and government is not obliged to rescue them
beyond a reasonable social safety net. But government has a strong
obligation to prosecute the swindlers and compel restitution to the maximum
extent possible. As with virtually all con games, most of the money is
gone. The government is faced with a very difficult problem, since we're
talking about swindles that were apparently largely legal (failure to
regulate) and on such a large scale that there is no common sense solution.
Simply put, no government action, inaction or blunder excuses a swindle. If
the government somehow led the mortgage industry down this path, the
industry is no victim, it is neither blind nor vulnerable -- it did not have
to follow. Anyone who imagines that on its own, the industry will accept
culpability in the form of some sort of voluntary restitution, is dreaming.
If government policy was wrong, it needs to change, but that will never be
an excuse to take the con artists off the hook. Our government is our means
of holding swindlers accountable; only the most extremist of anarchists
would argue that free markets do so.
Those who champion personal responsibility and government accountability
seem strangely eager to excuse corporate misbehavior by pointing the finger
at the victims ("you shouldn't have taken that loan") and their legal
protectors ("the government encouraged me"). Yes, the victims should have
known better. Yes, the government blunders. But no, those issues do not
remove responsibility from industry and the individuals who profited from
the con game.
Nick
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