The Real Credit Crisis

1. October 2008 by Satire V.

So far, a majority of the House of Representatives have done the right thing regarding the “credit crisis” by refusing to pass the bailout bill.  Unfortunately, there is some indication that the resolve of some members may waver given enough time.   The final result is likely to create even more such problems in the future.  Much of this problem was created by liberal policies dating back many years; that is, the encouragement of bad behavior by rewarding it.

In this case there are journalists, politicians, and even the President telling us how there won’t be credit available to those who need it.  Eventually, there will probably be something that most refer to as a “solution”, but how can an exacerbation of the root of the problem solve anything?  The problem in this case has been offering credit to everyone, regardless of ability to repay.  This has been partially due to government policies intended to encourage (pressure and threaten) lenders to give credit to everyone to make housing available to all, confusing home ownership with the American Dream.  Too much credit has been available, and there have been no positive consequences for good behavior.

The real opportunity here is to reduce available credit; creating a negative consequence for failure to pay, or late payment of bills and obligations.

If  Congress insists on spending to fix the problem the way to do it would be to make a few payments on the mortgages of responsible homeowners.  Those that took fixed-rate mortgages well within their means would be the best place to start.  This would be a great way to encourage the right kind of behavior.

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