That Which Is Not Seen

Bush announced the other day a plan to "fix" (I use that word in the most unflattering of ways, such as: "there was no beating the house in Vegas because the games were fixed") the mortgage crisis in the United States.

A key part of the plan involves freezing interest rates on mortgages that were "teaser" rates to induce people to borrow (also called by their proper name, "adjustable rate mortgages").

(deep breath)

There's a lot being written about this. A rather favorable analysis can be read here, and a rather unfavorable one can be read here.

I can't help but wonder if there's a bigger issue, however. No surprise to anyone who reads this blog, but I immediately focused on the destructive way this plan affects self-government. If people aren't responsible for taking on enormous debt loads, what's to stop them from making other bad choices? If investment banks aren't responsible for trading in securities without accounting for the inherent risks in those securities, what's to stop them from making other bad investment decisions? And more importantly, is there any crisis that the government shouldn't bail people out of?

I have always remarked that one of the great things about the US economy is that we take our punishment. Unlike the Europeans or even the Japanese - who were mired in a decade-long recession - when we over-reach, we get beaten up and knocked down quickly. And hard. But we get back up. And we're stronger for it. But maybe not anymore. Maybe we're going the way of the Japanese or the Europeans. Time will tell, but I think this bail-out is a disaster on many levels, particularly those which are not readily seen.