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Socialism in the USS of A - Get ready for higher interest rates

One of the cool things we learned from the Bush administration is the wonderful merits of Socialism!

Get this. Lawmakers are writing up legislation to allow judges in bankruptcy court to modify loans by reducing principle. Neat.

This is how it works... can't pay your mortgage? Just file for bankruptcy; your principle will then be reduced by a bankruptcy judge. Done. The best part is, you'll feel great knowing you're sticking it too all those free-market purists, many of which are financially responsible.

The fact is, investors who buy these loans will expect more in higher interest rates to cover the eventual losses. That's how the responsible will get screwed!

First the banker bailout, now the home speculator bailout.

"If the mortgage cram down bill is passed, it will drive many homeowners to bankruptcy, lured by the promise of wiping out mortgage debt. The loan modification program allowed the banks to pretend that the amount they were owed would still be repaid over time. When the loan gets reduced in bankruptcy, this illusion will be gone. More write offs by the banks could lead to a self defeating cycle of tighter credit, stricter mortgage underwriting, weaker housing prices and further bailouts."

  • January 07 2009 - US
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