Should the government bail out the mortgage industry?

Over at Express, they have a poll asking if the mortgage industry deserves a federal bailout. Actually, they don’t word it like that – the industry clearly does NOT deserve any help. They’ve brought this on themselves by extending too many loans to risky borrowers, banking on a strong market to counteract the risks. Having worked at Fannie Mae, I can promise you that some very smart economists told management that this was a bad, bad idea.

But should we bail out the industry for the sake of the rest of the country? I don’t think we should. However, it’s easy for me to say that, as the wife and I make enough money to support ourselves comfortably, and aren’t really feeling the effects of the economic downturn. I would probably feel differently if I were one of the tens of thousands in the mortgage industry who have lost their jobs (While former Fannie CEO Frank Raines rolls around in his golden parachute – I bet a good chunk of this is his fault).

The problem is that the mortgage market must be a huge factor in the economy.  For how many people is the home the most money they have ever or will ever spend on anything?  It follows that the mortgage market must be important to a lot of people.  So what do we do with that?  Do we allow it to move up and down with minimal oversight?  Or do we regulate it strictly to make sure that the people at the bottom don’t lose their homes?

I know the issue isn’t so black and white.  There’s a huge gray area.  But I think things are better when we’re at the less regulatory end of the spectrum, and I’d like to see us stay there.  I know this means that people are going to lose their homes when the market is bad.  But you really can’t save everyone.

In any event, I’ve totally lost my train of thought.  So far, 87% of Express readers agree with me.  I expect 75% of those are no more than the minimally informed that I am.  But that’s the nature of online polls.

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