Agreeing with the Wall Street Journal

OldVet sends along this….

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Yue Minjun, in his Beijing studio, surrounded by self-portraits. Did he borrow, or did he lend?

The Not Paulson Bailout is discussed in the Wall Street Journal. I’m ordinarily skeptical of editorials in the WSJ, but not today.

“Mr. Paulson’s nonplan would allow states to float more tax-exempt bonds to refinance subprime borrowers. State housing authorities can now float tax-exempts to help first-time home buyers, but Treasury wants to let them float bonds to refinance loans or pay closing costs as well. This is clearly a taxpayer-financed bailout.”

On the other side of the political street, “Right on time, Hillary Clinton weighed in with the truly awful idea of freezing subprime mortgage rates for five years — presumably, through the end of her re-election campaign in 2012. She’d combine price controls and contract repudiation — an Argentina double.” And some 62% of Americans oppose a mortgage bailout plan. Reason is 95% of Americans are making their payments on time and don’t want their tax money used to assist the irresponsible. (I’m firmly in that camp.)

Freezing rates may make people happy temporarily, but makeshift solutions that don’t bring down real estate prices prolonged the S&L loan crisis in the 1980’s and ended in the deflationary spiral that devastated the Japanese banking industry. And the likelihood of default is high, even if interest rates are frozen.

There are many incentives for reckless lenders to cut a private deal with reckless borrowers, not least of which is the cost of a default on a mortgage. Some people will have to start renting an apartment, as they should have done while saving up a proper down payment in the first place. Where is the shame in that? Only in the minds of the haughty.

One lesson in all this mess is clearest of all: That the American Dream, if it is limited to buying a house and spending lots of money, is a fragile dream.

My own version of the American Dream doesn’t involve buying anything. It involves getting a good education, working hard, and having the same chance as anyone else to succeed or fail. It means becoming a liker of people and a lover of great ideas and a traveler in the world. It means seeking to participate in the arc of great events as life moves from birth to death. To achieve any small part of this American Dream means more than what I own.

How about you?

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OldVet sent this link.