The Nanny State in Action

Both Mark Steyn and Michelle Malkin take our "conservative" government to task this week.  This time, it's in the bailout being given to those holding Adjustable Rate Mortgages (ARM's).

Granted, things are tough now for those holding adjustable home loans.  Those banks issuing the loans set up the contracts so that when the cost of money goes up, so does the interest rate, thereby allowing them to recoup their money.  Economics 101.  By freezing the rates, the US Treasury Department has screwed up the very mechanism banks have to make something capitalists call "a profit". 

If the lenders can't make their money back with ARMs, it'll come from somewhere else.  Credit tightening in housing, higher interest rates in other loans, and before you know it the very borrowers the treasury saved here are having problems in some other area.  Cap one area and the pressure blows somewhere else.

Both ends of the ARMs contracts were adults, knowing exactly what they were getting into.  By moving in to "fix" things, the government is only swooping down to be the borrower's nanny.  Cap the interest rate, and all your problems go away.  Forget the contract you signed, it's all in our power to fix your problems.

Bush and his economic gurus should have stayed out of this and allowed the market to handle it.  Sure, it looks in the short run like we're helping folks, but in the long run we'll see bigger problems pop up.

Maybe the Treasury Department needs the book Economics for Dummies.

(HT: Hugh Hewitt and Captain's Quarters)

-Colonel Steve