Lets congratulate the Bush administration, the Federal Reserve and the democrat controlled Congress. It looks like they have come up with a breakthrough approach to problem solving that may finally end the world's problems once and for all.
The breakthrough came with the idea to freeze ARM rates so
that borrowers will not be subjected to the terms of the agreements that they
voluntarily signed. Combine that innovative thinking with the ongoing efforts
to save Wall Street from its own irresponsible actions. It seems that the U.S.
government and the federal reserve will finally succeed in realizing a foundational
tenet of liberal politics - change the laws and the way financial markets work
so that we can eliminate personal responsibility and individual accountability
once and for all.
Just ignore the fact that the "full faith and credit" of the United
States government will be undermined and perhaps destroyed. Never mind that
every individual involved here has made decisions that they knew had risk and
potential consequences.
Lets just ignore the terms of existing mortgage loans, let all borrowers in default off the hook, pass some new laws, and expand FHA so that the American taxpayer can be required to pick up the tab for a new round of subprime lending under the guise of "government guaranteed loans". That way we can avoid a financial meltdown, avoid consequences of our collective actions, and continue to expand this madness even further by making the same stupid financial decisions in the future at taxpayer expense.
But in pondering the situation in which we now find ourselves, I realized that in fact this line of reasoning may actually be used to save the world and solve all of the worlds major problems.
If we can simply decide to alter the way financial markets operate, change existing contractual commitments in the middle of the game, and in the process ignore the long term consequences of such ill advised actions, then lets just take this line of reasoning one step further and solve all of the worlds problems.
As soon as the U.S. government gets finished solving the world credit crisis, which may take another week or two, lets move on to some other major issues...
Global warming - How about a law that stops global warming by mandating that all future carbon emissions should fall to the ground and wash away with the next good rain storm?
Eliminate the threat of world pandemics like Bird Flu - How about a law that says that all birds who are sneezing or have a "runny beak" shall be required to stay at least 1000 feet away from any humans?
World Hunger - While we're at it, lets make sure that all of the oppressive regimes in the "third world" are required to feed all of their citizens until they get at least as fat as the average citizen of "first world" nations.
I know what you are thinking...these are obviously silly ideas that can't be enforced by passing laws...I rest my case.
Only one thing can solve the present financial crisis we find ourselves in, and that is to let the chips fall where they may. Let the free markets do their thing, let the accountability fall where it lies...at the feet of those who have made irresponsible financial decisions that they must be held accountable for. Let all involved learn their lessons, and learn that decisions have consequences, and that risk and reward go hand in hand.
We will never solve problems by ignoring them, failing to account for them or by trying to avoid the consequences of our actions. Borrowers who borrowed more than they could afford should learn that there is a price to be paid for such irresponsibility. Lenders who make loans to people who can't afford those loans need to understand that there are consequences for such irresponsible business practices. Investors seeking high returns need to understand that high risk follows high reward. All investments look good on paper, but reality can be a very different thing.
Until we are willing to confront our own financial irresponsibility by facing the consequences of our own personal decisions all the way down the financial "food chain", we will never reach a point of true financial stability again. America is already at a crisis point, and a potential turning point in our history that theatens to undermine our national stability and could well be our undoing in the near future. Only a return to integrity and personal accountability will stabilize the system and restore the "full faith and credit" of the United States of America.
Any financial system is only as good as the integrity and commitment of the individuals who are involved in it. When it's all said and done, it all boils down the the actions and decisions of millions of individuals. There is a reason why home buyers were once required to make substantial downpayments. And there is a reason why financial managers are expected to follow common sense rules of finance and investment.
Oh - I just thought of one more law we need to pass...let's recognize that the government is not our "baby-daddy". We don't need more "child support" to be paid by already over-burdened American taxpayers. Let's pass a law that says that all members of the U.S. Congress, and all state and local municipalities must manage taxpayer funds with sound financial principles so that the american taxpayers actually realize a solid return on their investment...Yeah, I know, this really IS the most ridiculous idea of all, but you can't blame me for daydreaming.