REASONS YOU DON’T HAVE A RIGHT TO OWN A HOUSE
Colorado Springs Gazette, 10-16-08
There is no right to a house. People should keep their promises. People should not be shielded from the
consequences of their actions. Trying to
improve on the market makes things worse.
If these ideas were engraved
on the Capitol dome, the mortgage meltdown would not have happened. You and I would not be on the hook for
another trillion dollars.
First, there is no right
to a house. Houses require capital to
construct, typically more than people have.
Banks solve this problem by gathering capital from depositors and loaning
it to you.
After you get your house,
you may not care about paying back the loan.
The bank’s depositors, however, care a great deal. Depositors don’t want to lose their money, they’re just funny that way. That’s why, if you can’t pay back the loan, the
bank gets the house. Which brings me to…
Point number two: Keep your promises. A mortgage is a promise to give your house to
the bank if you cannot pay back the money that made your house possible. Even
if the inability to pay is not your fault, you don’t have the right to make
other people bail you out. Ultimately,
that’s what any government rescue is.
Bailouts create a terrible
moral hazard. When government says
people don’t have to keep promises, it also says promises aren’t worth keeping. In that world, people who keep promises and
manage their affairs prudently are just stupid chumps. Such a world is far, far worse than one where
people move out of houses they can no longer afford.
Point three: Shielding people from the consequences of
their actions is bad. The unique American
experiment in self-reliance is degenerating into one where no one is
responsible for any decision they make.
Once a Wall Street
investment firm gets big enough, it cannot be allowed to fail “for the good of
society”.
Sorry, but two wrongs
don’t make a right. Some of us believe
that no one, rich or poor or anywhere in between, has the right to be shielded
from their decisions. Sadly, there are
too few of us to be worth pandering to.
Point four: Trying to improve on the market makes things
worse. Stupid borrowing is only part of
the story; lots of people who make bad decisions are just responding to
incentives. In fact, the meltdown
happened because of stupid laws, passed because nobody cared about the first
three points.
The
Under the guidance of our
elected officials, Fannie and Freddie drive the train of American
mortgages. Unfortunately,
after twenty years of drunken engineers at the throttle, that train has
crashed.
It left the station in the
90’s when Bill Clinton told Fannie Mae and Freddie Mac to reduce lending
requirements to levels no sane bank would ever have agreed to, for the
politically popular goal of “increasing home ownership”. Given that the poor and some minorities are
less likely to own homes, who could argue with that? Unfortunately, nobody.
But we can’t just blame
Democrats. Some of the most egregious
arm-twisting of lenders occurred while Republicans ran the show. In 2004, for example, the Bush Administration
proudly announced the new HUD “Zero Down” mortgage as a way to increase home
ownership. The fact that banks require down payments to
help keep depositors’ money safe seems to have eluded politicians of both
parties.
So now we’re stuck with a
trillion-dollar bailout, under the spin that good people were subject to the
excesses of unregulated capitalism. We
believe nobody is responsible for their actions, but if we just vote for the
right people who will tell us what to do, we’ll be fine.
Enough. The morality of individual freedom and the
prosperity of free markets are intimately connected. If you diminish one, you will destroy the
other. It is time we learned that lesson.