My dad always said there were two topics on which you should keep your opinion to yourself, politics and religion. Normally, I’d say that’s good advice, but I just can’t help but pick this one up. USA Today is reporting that Hillary Rodham Clinton is lobbying for penalties for predatory lenders and a big $1 billion (yes, with a “B”) bailout for those who were the victims of such practices.
Now, I hate to dwell on the obvious, but isn’t going out of business a big enough penalty for making bad loans? Becuase that’s basically what’s happening to those who made those loans. Do we need and additional “penalty” to let them know the government thinks what they did was a bad idea? Perhaps some additional legislation to ensure they never do it again would be a good idea too. You can never have too much legislation.
And what about victims — er, borrowers? Poor innocent people who had no idea they couldn’t afford to pay back what they’d just signed for. We should give them enough money to bail them out, becuase they didn’t read (or ignored) the contracts they were signing. I know several “victims” who figured they’d ride the horse as long as it would continue moving forward, and then get off when the party was over. I know of some who figured if the lender was stupid enough to offer the money, why not take it and live the vida rica for awhile?
I’d say the lenders learned a lesson about lending to people who can’t afford to repay. I’d say, based on recent changes, the investors who provide money to the lenders also learned a valuable lesson. I’d also say the borrowers learned a lesson about reading the contracts and calculating the costs of their decisions. Everyone had a learning experience and we don’t need more legislation and we don’t need additional penalties.
It’s like when your child burns his finger after touching a hot stove (which you warned him was hot.) The lesson is learned. There’s no additional value in grounding him to the yard for two weeks. The pain in his finger is a constant reminder of why he should listen. Grounding accomplishes nothing. And on the other hand, why would you want to take away the pain of the burn (in effect, bailing the child out)? It’s the pain that teaches the lesson. Do we really want to teach the child that it’s okay to touch the stove? That it wasn’t his fault he got burned? That we’ll always be there to “bail him out” when he does something he shouldn’t? Are those the lessons we really want to teach?
Come on! Legislation and penalties will accomplish nothing that hasn’t already been accomplished by the natural consequences of the actions. Everyone in the decision-making pipeline learned something by what happened, and the market changes indicate those lessons were well learned. Get big government out of our lives and out of our pockets. We don’t need more big government. We need people who are responsible. That comes from making bad choices and feeling the consequence of those choices.
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