Thursday, December 6, 2007

Brief reflections on the subprime bailout and politics

I'm wondering what other people think about the proposed subprime bailout. I guess I will do some reading later today, but let me give you my initial thoughts, which I had even before reading this piece in Forbes. It seems to me that all we are doing here is rewarding bad past behavior and encouraging future bad behavior. Yes, go ahead and be stupid, Uncle Sam will fix everything for you! What the heck ever happened to taking personal responsibility for your actions? And why are we letting everybody off the hook so seemingly easily? Am I missing something here? Yes, I understand the potential need to intervene into the market from time to time to prevent a disaster, but there has to be a limit. Isn't there a better way?

When I was a kid I always thought I would be a public official. Technically I am since I am proud to serve as a trustee of my local library. But then I became jaded by the necessity of full-time fundraising and the transformation of politics from statesmanship to partisanship. But reading stuff like this makes me wonder whether we need to find people willing to be a Cincinnatus, or at least people willing to put partisanship aside for the better good (and without worrying about lining one's pockets to boot).


BawldGuy said...

David -- I bet we agree on one point not mentioned in your post.

This 'agreement' was about as voluntary as was me being behind a push mower ever Saturday morning in my youth. :)

It was much preferred by me to be mowing our lawns, than the, ah, alternative.

Also, it seems to me, lenders have very conveniently used this gov't 'assisted' agreement as cover for their own interests.

Does anyone really believe they want to flood their REO departments with guaranteed losses? Not to mention the additional losses attached to actually getting rid of the losers on their books.

Your thoughts?

David Stejkowski said...

That is a superb point! The assist to the lenders does limit the number of REOs (which of course limits opportunities for those who deal in those types of properties).

I absolutely agree there was little voluntarism here. Indeed, it may have been the only realistic choice of lenders to try and maximize portfolio value.

Additionally, I wonder how the coupon-clippers in the MBS market will really be impacted by this. Is this a bad thing because it curtails the upside or a potentially good thing because they may end up getting more than $0.23 on the dollar?

All in all, when I think about this I still feel like no bad deed goes unrewarded and no good deed goes unpunished.

BawldGuy said...