The genesis of the no-fault foreclosure, bankruptcy, etc.

The recently passed housing legislation, signed by President Bush last week, has something for everyone. Republicans got protection in place for the mortgage lenders, Democrats got protection in place for borrowers. Who says bipartisanship is dead? Even though the passage of the legislation is likely to give some short-term-feel-good reaction in the economy, the long-term result is likely to be only further government intervention in the marketplace. Instead of natural market activity allowing for players to either take advantage of opportunities, or take their lumps without a government-provided safety net, we appear to be in the beginning stages of a 1930’s-style big government growth phase.

One aspect of the housing legislation of particular concern is the $4 Billion provided to local municipalities to purchase, restore and resell foreclosed properties. I’m not sure how many local municipalities ought to have a Federally-sponsored “no down payment” real estate business, but Congress and The President obviously seemed to think that the various city and county officials could make a go of it. Maybe the thought is that the extra income will offset other declining tax revenues. There will probably be increased sales of the books and DVD’s offered via infomercials at local taxpayer expense.

Over the last week, too, there has been increased talk of a bailout of U.S. auto makers. Since the housing legislation was such a bipartisan success, perhaps members of both sides of the aisle are looking at all the goodies that can be loaded in that bill as well. Why say "no" to this initiative either. Here again, it is unlikely that in an election year, Congress will have the stomach to allow market forces to rule. Both sides surely fear the commercials run by opponents if plants in the Midwest shut down. Even Senator McCain has said he would be in favor of such a plan leaving conservatives to scratch their heads at where we went wrong.

Obviously, it appears that those in elected office have lost faith in the American enterprise and the resilience of the people. Instead of letting market forces take effect and have the winners win and the losers learn from failure, we have created the business equivalent of the kindergarten playground where everyone gets to win and the most important thing is that everyone’s self-esteem is intact; particularly the self-esteem of the politicians as they go home to face voters. Unfortunately we cannot afford to continue to bailout everyone in crisis with a government program or bipartisan legislation. The taxpayers don’t win that game, and our nation will end up looking for the world bailout on our currency and Treasury debt. That bailout isn’t likely to appear.

Meanwhile, as Congress looks for more ways to put band-aids on skinned knees, we risk bleeding to death from policies of past entitlements and bailouts that created the largess of government we have today. We’re left to wonder about the long-term effect in 70 more years of the current government reaction to the climate of “it’s not my fault.”