McCain’s Housing Restraint

George F. Will – McCain’s Housing Restraint –

[McCain] says “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.” For now, he is with Senate Republicans in opposing the Democrats’ proposal to empower judges to rewrite the terms of some mortgages, an idea that strikes at the sanctity of contracts and hence at the ethic of promise-keeping that is fundamental to social life. He opposes an additional dose of the toxin that has made the credit system sick — he favors strengthening rather than weakening down-payment requirements for loans backed by the Federal Housing Administration. And he has admirably avoided the rhetoric of victimology, such as that used when The Post editorialized that “lenders pushed tens of billions of dollars in potentially high-interest mortgage debt on people ill-equipped to handle it.”

With the command-and-control propensity of contemporary liberalism, Clinton predictably advocates a policy that has a record, running from Roman times to the present, that is unblemished by success. It is the policy of price controls: Her proposed five-year freeze on interest rates would be a control on the price of money.

Obama says that McCain’s (again, relatively) noninterventionist response to credit difficulties proves that he favors a “you’re on your own” society. McCain, a center-right candidate seeking to lead a center-right country, should embrace Obama’s accusation as an accolade, saying:

“This is the crux of the difference between the two parties — belief in the competence, responsibility and accountability of individuals. When Obama characterizes my position as ‘little more than watching this crisis happen,’ he again has part of a point. The housing market must find its bottom, and no good can come from delaying the day that it does.”

The market, which bewilders and annoys liberals by correcting excesses without the supervision of liberals, is doing that as housing prices fall far enough to stimulate demand. Witness this recent Financial Times headline:

“Property sales pick up as prices plummet.”

The story began: “Sales of previously owned homes in the U.S. rose for the first time in seven months in February, while sale prices fell by their most in at least 40 years.” By golly, the Gershwins were right: The age of miracles hasn’t passed.

Delaying the drop in home prices will only make the situation worse. As so often in life, the answer is obvious: pull the band-aid off quickly.

2 thoughts on “McCain’s Housing Restraint

  1. In Germany contracts (or pieces of them) can be ruled by a court to be “unsittlich” – or indecent, or they can be determined to be unenforcable.

    I am most familiar with rental and employment clauses. Your rental contract may include a clause forbidding you from bathing after 10pm and before 7am, but you can’t get kicked out of your appartment for doing so, because the clause exceeds the reasonable restrictions you can place on someone in a residential unit. You can forbid a dog, but the occaisional visit from a dog owning friend may not be forbidden. Protest the eviction on those grounds and you will win.

    Ditto employment – there was a discussion of the contracts that the germany’s next top model candidates had to sign >40% of income to the show and extention at discretion of show (with no input from model). The clauses may be “unsittlich” and contestable – even though the contract was signed because they don’t meet the generally accepted standards of decency.

    As a Christian I have no problem with usury laws (the current ones are ridiculous) – perhaps not related to mortgages but related to the credit nightmare we are in. Perhaps priests ought to teach on it.

  2. Well, the same thing is true in America; for example, any contract binding someone to slavery or indentured servitude is invalid. The difference in this case, is the ex post facto rewriting of those contracts which contained nothing inherently usurious or illegal.

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