There are few things that illustrate the libertarian viewpoint more vividly than the current mortgage crisis. Thousands of home buyers buying homes that they cannot afford, and then the bank being surprised when they stop paying for them. I cannot say that the entire mess has been a surprise, with what I have seen over the past few years.
This brings us to the viewpoints of the various political camps in this country:
Liberal: The liberal viewpoint blames the lender. After all, if the lender made the loan to a person who could not afford it, even though they knew it, it is their own fault. Those evil corporations have been turning a profit off the little guys for years. The predatory lenders are now getting their comeuppance. The government should step in and protect the little guy by fixing interest rates, and finding other ways to let the little guy keep his house.
Conservative: The people who borrowed money that they could not afford are to blame here. After all, they signed on the dotted line, so why should the investors suffer? They loaned the money out with the expectation that they would be repaid, so the borrower should repay it. The government should step in and protect the assets of the lenders and their investors by making bankruptcy harder, and perhaps infusing some cash into the lenders as assistance. After all, if the banks go, so does the economy.
libertarian: The lenders and the consumers both entered into a contract. They both had opportunity to decide for themselves whether or not it was a good idea to participate. If the borrower defaults because the lender allowed him to overextend himself with an adjustable rate, interest only balloon payment that they knew could not be repaid, so be it. If the lender loaned money that they knew the borrower did not have the means to repay without resorting to financial gymnastics, so be it. The government should stay out of it, because it is not my fault that the parties involved were greedy, and were trying to trick the system. One way or the other, this will fix itself.
In the long run, the government screws up everything it touches. It is better if they stay out of it and stop trying to generate wealth through taxation, which reminds me of a man trying to lift himself off of the ground by standing in a bucket and pulling feverishly on the handle.
What you mentioned about the "conservative" viewpoint of the mortgage crisis is incorrect.
ReplyDeleteThat viewpoint belongs to the corporate welfare types who manipulate the system to their advantage. Free market fiscal conservatives do not adhere to that kind of interference from the government. Just like in any bubble, when it bursts, people get burned and they actually need to get burned. As a result, the best thing to happen is for the market to correct itself. That kind of government intervention prevents market corrections and free market conservatives do not suscribe to that opinion.
That is more of the "country club" type of view which is in no way part of free market conservatism.