Tuesday, June 17, 2008

A great quote

"It's not the government's job to stop you from doing something stupid."

Dave Ramsey, financial adviser and radio host

Ramsey was referring to the federal government's proposed plans to further meddle in private contracts between housing lenders and borrowers, but since it applies to so much more than financial matters, I thought I'd mention it here.

Ramsey does apply that quote correctly in analyzing the current mortgage mess, though. The lenders who made all of those risky subprime loans deserve to take it on the chin when their expected mountain of riches instead turns into a pit of debt. Borrowers who don't read their contracts, or who refuse to spend $200 or so on a lawyer to review a six-figure mortgage, or who sign up for a "too good to be true" deal, are just as culpable.

It wasn't all that long ago that major newspapers were editorializing about suspected "redlining", or the practice of denying prospective mortgages to people based on racial, geographic or other factors. Nothing was ever proven, but could it be that a lot of the potential borrowers simply didn't make enough to qualify for the mortgages that they were applying for? After all, companies aren't generally in the habit of turning away business that generates profit for them.
A lot of these "poor, taken advantage of people", including the realtor who was in cahoots with the seller of my current house, are actually real estate speculators who gambled that the housing market would continue to rise forever. They're no different than the day traders who play the risky stock market game. Should the government refund their money as well, or step in and force the rewriting of existing stock contracts, should the Dow Jones average take a major tumble?
As long as the terms of a deal are disclosed openly and according to law, the Feds have no business interfering with a private business arrangement between two entities. Agreed, it sucks if the deal goes south for one or both sides, but that's how life works sometimes. Our tax dollars can't go towards bailing out the losers of every single risky investment that comes down the road.
(Sorry about the terrible formatting. Blogger doesn't seem to be playing well with others today.)

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