New York Senator Charles Schumer wants to throw some compassion (and money) to consumer groups to bail out troubled homeowners. Its a noble gesture that will certainly help some people, but its really just a drop in the bucket. Salve in the wound so to speak.
Here is my problem with this sort of throwing money at the solution solution:
- The idea of government providing help to its citizens have a very recent bad history (remember the extra FEMA trailers for New Orleans?)
- The amount proposed has got to be a fraction of what is really needed as evidenced by the nearly 30 subprime lenders that have gone out of business in the past 2 months.
- I would imagine that not every one of people hurt by subprime lenders, were unaware of the gamble they were taking. At what point does personal responsibility start?
- And most importantly, this will virtually guarantee that if this bill is passed, a few years from now we will read about how the money was mismanaged.
In the rush for profits and lack of supervision, subprime lending will have a lot more to answer to in the future. Pointing the finger is a natural reaction to this and its deserved, but it doesn’t change the system. A lot of people were hurt, and so far, no meaningful discussions on how this could have been prevented have taken place.