Not content to leave bad enough alone

We’ve noted that of all the bailouts, both enacted and proposed, the current proposed housing bailout is the one that has caused the most visceral response among the citizenry. Why is that? It’s pretty simple, actually, because it is the one that, literally, hits closest to home. We’re somewhat insulated by geographic and socio-economic distance from the auto and financial bailouts but the mortgage bailout involves what is probably our most significant economic investment and which also sets next door to a “troubled” mortgage that happens to have a luxury SUV and 22’ Chris-Craft parked in the driveway.

Last week, the housing package that was expected to pass through the House, hit a snag over the role of bankruptcy judges and their ability to reduce principal and interest rates on mortgages…. just like that.

What the Democrats are bickering over, of course, is the scope and breadth of who will benefit from this magic wand-waving by the bankruptcy judges. Liberals are pushing for expanding the scope of legislation to include those who are merely “struggling” and not necessarily filing for bankruptcy. Moderates argue doing this will impose to great a burden on the banks as they will be forced to raise interest rates and fees on new loans to make up the difference…. and wouldn’t that have and outstanding effect on the housing market?

And this is why the concept of these bankruptcy judges remains such a horrible idea: one is promoting and acting on the concept of rewarding bad behavior. We can’t dress it up in any more flowery language than, simply put, it’s un-American. That’s not how we operate here – at least that’s not how we used to operate.

Additionally, and which is something we predicted here, one is once again manipulating the market for their desired result and someone will have to make up for the “restructuring” the banks and lending institutions will have lost out on as a result of these bankruptcy judges and it’s not going to be Congress.

P.S. All this in a market that is showing some encouraging signs. Existing home sales in California were up 100% from this time last year. How is it possible? How can it be that absent Congressional action, the housing market, which was the first segment of the economy to turn south, looks to be the first segment of the economy to finding the bottom and start heading north again? In peddling a climate of fear, however, it’s best to just ignore that bit of news and press on with your agenda.