Resentment rising against local foreclosure bailouts

People who are not at risk of foreclosure are getting understandably angry about their tax dollars being used to bail out those who made bad decisions, taking on more house than they could afford or not understanding the loans for which they signed:

As the Bush administration and Congress consider proposals to ease the home foreclosure crisis, local governments across the country have been lending money to imperiled homeowners and confronting some opposition.

Some of these municipal and state efforts have met resistance from people who consider the assistance undeserved and adamantly oppose anything that resembles a taxpayer bailout...

The goal of these programs is not just to keep people from losing their homes, but also to limit broader economic fallout, including plummeting property tax revenues and widespread declines in home values. Still, they pit what some government officials say are practical economic solutions for the common good against individual ideals of fairness and personal responsibility.

The opposition may be rooted in “this ancient notion of deserving versus undeserving, and you’re undeserving if you made a bad decision,” said Nicolas P. Retsinas, the director of the Joint Center for Housing Studies at Harvard University.

While the negative reactions have not stopped the assistance efforts, it has put some local officials on the defensive and forced them to try to sell the programs to the general public, not just to the intended recipients...

Small, government-supported “rescue loan” programs have been used in many places before. Those efforts, as well as the current ones, typically have been cast as having broader benefits, similar to the way public health programs are portrayed, Mr. Retsinas said.

“Much of the rationale,” he said, “is less the notion of keeping an individual from getting sick than it is, ‘If we vaccinate this person, their illness won’t cause other people to get sick.’ ”...

Government has a history of getting involved in foreclosure crises. During the Great Depression, the federal government created the Home Owners’ Loan Corporation, which helped refinance about a million loans — and made a profit in the process. In December, Alan Greenspan, the former Federal Reserve chairman, suggested that government provide assistance to homeowners facing foreclosure...

Alex J. Pollock, a resident fellow at the conservative American Enterprise Institute who has written about the foreclosure prevention programs of the Great Depression, echoed concerns that, in some cases, government intervention could reward irresponsibility and make markets unpredictable. “The problem on the other side,” he said, “is if you have a general problem that threatens to cause a general downward spiral, then everybody’s going to suffer.”

What some people don't understand is that our society is based on continuously bailing out people for thoughtless behavior and bad decisions: it's part of the cost for living in a society such as the U.S. Simply put, we have a social safety net that helps out the less fortunate as well as the idiotic. It's not necessarily fair, but it's the system we have in place.

For example, we all pay higher car insurance rates to pay for fraud and those without insurance. We all pay higher insurance for medical care because hospitals are generally obliged to treat those without enough -- or any -- insurance. We pay higher drug prices than most other countries so drug companies can continue to invest in research (as well as lobbyists and friendly lawmakers who want to remain in office so they can be around long enough to reward the drug companies for their donations). We pay higher taxes so that some people can receive welfare and food stamps and Aid to Mothers with Dependent Children. Many of these people have also made thoughtless decisions -- should we punish them too by withholding their assistance and replacing it with a stern lecture?

Some of these dissenting homeowners also don't understand that a foreclosed home across the street from them has a domino effect: first, it impacts the value of their home. Next, it makes it harder for them to refinance or sell (or move to take advantage of a new job).

I'm predicting a bail-out from the federal government that will truly anger a lot of people. But that's the system we have -- sometimes we just protect people from themselves.