Bush Housing Bill Irks Taxpayers

July 30, 2008 -- President George Bush today signed into law landmark legislation intended to help the millions of Americans buckling under the stress of declining home values, increased prices and poor financial decisions made years ago . Although this legislation is welcome relief to millions afflicted by these turbulent times, many Americans are vocally expressing disdain for having to foot the bill for other people's mortgage blunders.

Although a full root causes analysis of the current situation traces its roots to the dot-com bust of the late 1990s, the bulk of the blame for the mortgage meltdown falls on greedy consumers overspending and under planning during the housing run-up earlier this decade. As with most complex situations of this magnitude, there are two schools of thought on who really is to blame: one side blames consumers for their abundance of greed while the other side places responsibility squarely on the "creative financing" options cooked up by banks.

The former idea espouses that consumers are indisputably in charge of their own financial decisions, and that the decision to enter into a short-term adjustable rate mortgage (ARM) or, even worse, an interest-only loan was about as poor a decision as one could make. While the bank "teaser" rates on those ARMs and the option of not paying principal may have seemed highly enticing, an informed and educated consumer would have fled from those arrangements with the knowledge that the mortgages would ultimately adjust, and likely to unaffordable terms. With proper planning and responsible spending on the part of consumers, today's issues could have been averted.

On the other hand, consumers could never have entered into such agreements if they were not made available by banks seeking a quick, secured profit boost. That is, at least, according to the "blame the banks" camp. In this theory, greedy banks stooped to the lowest of corporate tricks for reporting profits by offering "deals" intentionally designed to capitalize on the "want it now" attitude by enticing consumers with low payments now and the real payments later. These offers ultimately allowed consumers to move into McMansions they wouldn't otherwise have been able to afford with the intention of making more money or settling other financial obligations before the real payments came due. When the time came to pay the piper, though, the plan backfired and banks were left holding dozens of properties not worth even enough to recoup the bank's investment.

Regardless of these school of thought or the blame game, today's legislation removes the burden of responsibility and shifts it to the American taxpayer, much to the ire of the elderly whose homes were paid off long ago, renters and responsible homeowners who carefully evaluated their mortgage options. Perhaps a better target for covering the financial shortfall would have been all those investors who profited from "flipping" houses during the housing boom, but that's a subject for another column.