Is The Proposed Market Bail-Out a Good Thing?

By Joel Persinger
YourRealEstateDude.com
Sept 22, 2008

A few days ago the Secretary of the United States Treasury proposed a massive bail-out of U.S. (and foreign) financial institutions. The details of the plan are sketchy at best, but the initial price tag was estimated at around 700 billion dollars at the time it was announced. This is in addition to the already astronomical costs associated with bailing out insurance giant A.I.G and financial hulks Fannie Mae and Freddie Mac.

Apparently, the idea is for the government to buy up all the bad mortgages out there and use tax-payer money to do it. That way the banks, which made the foolish decisions to provide shaky loans in the first place, won’t have to suffer the consequences of their foolishness. The U.S. tax-payer will simply pick up the tab and along with it, the risk of failure. According to the Secretary of the Treasury, this is a good thing.

Some members of Congress want to provide a bail-out plan for homeowners as part of the package. If John and Jane Doe can’t make their house payments, the Congress believes that its only fair that the tax-payer step up to the plate and make sure that John and Jane don’t have to suffer the consequences either. Never mind the fact that, in many cases, John and Jane are not victims at all, but rather, folks who made foolish decisions and dug themselves into a financial hole. But, we can’t let them fail! That would be un-American… wouldn’t it?

There was a time when Americans held the deep and abiding belief that the opportunity to succeed also included the opportunity to fail. Immigrants came to this country from all over the world in search of the very opportunity provided by that strong belief. Only in America did every person have the right to embark upon the dream of owning a business, buying a home and enjoying prosperity without government interference in the form of unfair taxation and crushing regulation. However, it was implicit in the design that having an opportunity to take a crack at success came with the very real risk of ending in failure.

That is not today’s America. In today’s America, people are not supposed to succeed too much, lest they be taxed and their money distributed to those who have failed. In today’s America, people are not supposed to fail. If they do, they can count on the government to give them some of the money it has taken forcefully from those who have succeeded. Dear reader, this is the essence of socialism and it bares no resemblance to the freedom upon which this nation was built. While it may serve to prop up the real estate and financial markets in the short term by controlling what happens at the top, it has every possibility of eliminating opportunity and freedom by destroying the foundations at the bottom.