While many are aware that we are in unprecedented times, the “throw everything at the wall to see what sticks” level of Government intervention seems to be the only answer coming out of Washington DC these days. With TARP, the largess of the highly controversial stimulus package, GMC, AIG, as well as the potential for the Federal Reserve to implement what is being called Quantitative Easing, we are witnessing a rapid dismantling of capitalistic motivators – Too big to fail is now commonplace.
While the increasing level of government intrusion into the free markets has seemingly and quietly (notwithstanding a few hundred thousand “Tea Party” demonstrators) become accepted within the marketplace, a rare moment of common sense was demonstrated last week in Washington DC:
With an astounding level of silence from our mainstream media, a massive bill which would have allowed bankruptcy Judges to have been given sweeping power to restructure mortgages for homeowners (cramdowns), failed in the Senate.
As IBD (Investor Business Daily) writes, “These judges would have the power to lower interest rates and the principal owed on homes to more “affordable” levels.
“Allowing bankruptcy judges to rewrite mortgages would deal a damaging if not fatal blow to the sanctity of contracts. They might as well be written on an Etch A Sketch.”
The financial burden of some may be eased, but it would only be transferred to their neighbors who bought what they could afford and made their payments on time.”The fact that this bill passed the House, and was only voted down in the Senate 45-51 goes to show that we are experiencing a dynamic shift in our philosophies as a free market system.
The result of this bill would have allowed individual Judges to make discretionary decisions that would have in effect, turned the Judge into a qualified mortgage underwriter; to make decisions regarding how much an individual’s mortgage principal should be reduced to along with the interest rate. Obviously, the losses on each mortgage portfolio any bank would have incurred would have been passed onto all mortgage holders, which mean higher interest rates across the board… Of course, this net cost to all consumers can be justified nowadays as a “sacrifice for all”.
These stories not only display the symptomatic effects of a changing economy but also demonstrate an almost unilateral unhinged response by the denizens of an old, disproven nationalistic philosophy; a philosophy that has been successfully repackaged, rebranded and marketed to a fearful proletariat as the only option available.