No entitlement to a bailout from a bad gamble on mortgages

I've written before about how many Americans feel entitled to a comfortable ride through life and then rush to dole out blame when things get bumpy. This entitlement culture is on display again with the mortgage crisis. Some elected officials, particularly those on the presidential campaign trail, are promising to bail out lenders and borrowers, freeze interest rates and stop foreclosures.

Consider the recent installment of CBS' "60 Minutes," which offered a critical look at the wave of foreclosures sweeping across much of the country. What bothered me were profiles of young couples who, once they could no longer afford mortgage payments and discovered they couldn't refinance because they owed more than the house was worth, simply abandoned their homes, skipping out on their agreement with the loan company. Never mind that they signed a contract. Never mind no one ever promised them their home would continue to go up in value. Never mind that someone -- namely, their parents -- should have taught them that when you borrow money, you pay it back.

Not that we don't have an interest in keeping people in their homes. We do. If many Americans are "house poor" because they're struggling to keep up with payments that have grown by as much as 50 percent in recent years and they're locked into subprime loans, then that means they'll have less money to spend on groceries, clothing or auto repairs. That means less money going into the pockets of merchants and others. And if people lose their homes, they'll wreck their credit, and that's bad for them but also bad for the rest of us. It'll make it harder for them to buy, for instance, a car on credit in a few years, which isn't good news for people who sell cars or those who sell things to people who sell cars. It's one of those societal problems with no easy and pain-free solutions being pushed along by an angry public that wants easy and pain-free solutions.

The Democratic presidential candidates are eager to please. One offers a bandage: Hillary Clinton wants to impose a moratorium on foreclosures for 90 days and to freeze mortgage interest rates for five years. The other offers a bailout: Barack Obama proposes a $10 billion home foreclosure prevention fund "to bridge lender and borrower" so that people can stay in their homes.

When asked about the issue during last week's CNN Republican presidential debate in Los Angeles, John McCain took a somewhat saner approach. He said that lenders must "return to the principle that you don't lend money (to people) who can't pay it back." McCain said there are "some greedy people on Wall Street who perhaps need to be punished" and urged that there be more transparency. He also said that, ideally, a mortgage "should be one page ... (with) big letters at the bottom that says, 'I understand this document.'" Lastly, McCain implied that any bailout should be limited to "people who were eligible for better terms but were somehow convinced to accept the mortgages which were more onerous on them."

McCain is on the right track. The only people who deserve assistance are those who should have qualified for a better deal. Even then, the most government should do is freeze or readjust mortgage rates. It shouldn't pay out a dime. Those who had bad credit and had to turn to the subprime market to buy a home should never have been buying in the first place. If you bail them out, what are the chances they'll wind up in a similar scrape down the road?

Thanks to unscrupulous lending practices where a lot of people made a lot of money by preying on others, and where many of those predators most certainly belong in jail, we now have a situation where many homeowners can't afford to stay in their homes. But make no mistake. We can't afford a wholesale bailout -- not just because of the cost to government, but because of the cost to our society and the principles that hold it together.

© 2008, Washington Post Writers Group