MInTheGap

If you follow what’s going on in the financial world at all, you know that there is currently a crisis in the housing industry surrounding Adjustable Rate Mortgages (ARMs) and subprime mortgages (those given to people with poor credit). These loans are hurting banks both foreign and domestically, and it’s also causing buyouts and stock market dips.

But what should be done about this rash of bankers acting like brokers and producing bad investments?

The Federal Government Could Bail Them Out

This one is the one being talked about the most, and to me it’s the most comical. Why? Because the Federal Government has been getting more money in than ever before and is spending money like drunken sailors. It’s incredible the amount of cash that they spend, and here they want you and I– the taxpayers– to pay for these banks bad decisions.

So, how would this work? We would absorb some part of the debt. That way the banks could keep running, and we’d impose some kind of regulations to make sure this didn’t happen again.

The Federal Government Could Impose Regulations

President Bush has actually done this to some degree. Basically, he had the banks extend some of the ARM periods so that people had a chance to get out of their ARMs before they adjusted up, and tried to make banks offer other ways to get out of debt so that people didn’t lose their homes.

But is This Fair?

A large part of the problem that I have with our current debt society is that there is the feeling by people in our culture that it’s ok to spend other people’s money, rack up debt, and you’ll be fine because either the government will bail you out or you can just declare bankruptcy and everything will be fine.

I’m the last guy that wants to see someone lose their house– but this happens all the time. People buy too much of a house, and then life changes and they can’t afford the bills. Banks are supposed to know this– and they are both the parties responsible– not you and I.

So, I would prefer something that makes these people indebted to the government (not that they’ve proven that they can pay their bills as it is) rather than just bailing them out.

So, How is This a Lesson for Me?

Don’t go into debt– but if you decide to get a mortgage, then make sure that you can make the payments. Have an emergency fund. Don’t just expect that everyone or the government will help you just because you’ve made a stupid decision.

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