Among my many eccentricities ("odd behaviors" sounds so gauche) is that I enjoy watching television news from Norway over the Internet. This comes from growing up in a home where Norwegian was the second, and often the first, language.
The last few days over there have been interesting, what with European banks falling like raindrops and Iceland teetering on the brink of bankruptcy. But I was especially intrigued by the analysis I heard the other day from Sofia Mathiassen, who is the political editor of a paper called Dagens Næringsliv. Translated, she said, "The thing I have been most afraid of is that we get an overactive treasury minister who comes up with one rescue package after another."
Her words were still fresh Tuesday night when I watched the second presidential debate and heard Sen. John McCain come up with the latest multibillion-dollar plan. He said, "I would order the secretary of the Treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes...and let people be able to make those...payments and stay in their homes."
Please don't read this as an endorsement of Barack Obama. He has as little clue as McCain how to handle the current economic crisis. But McCain's announcement — coming from the candidate of the party that is supposed to understand market principles — nearly had me crawling to the back deck for oxygen.
Before I could do that, however, a neighbor walked in to retrieve his daughter, who had just finished a piano lesson from my wife. He took one look at the television and began saying what I was thinking.
"You know what I want to know?" he said. "I was careful to buy a house I could afford. I've made every single mortgage payment on time and haven't taken out loans against my equity. Why should I have to pay to let people who were irresponsible stay in their homes?"
Until he came in, I figured I was the only one with such thoughts. Neither candidate seemed to have considered it. Nor did any in the zombie-like audience asking questions at Belmont University in Nashville, Tenn.
But it must be on the minds of many of the overwhelming majority of Americans who pay their bills on time.
Actually, some public officials have made mention of this, but you have to dig fairly deep to find it. Fed Chairman Ben Bernanke, for example, told a gathering of independent bankers in Florida last March that solutions to the mortgage crisis would have to be handled carefully. "Concerns about fairness and the need to minimize moral hazard add to the complexity of the issue," he said. "We want to help borrowers in trouble, but we do not want borrowers who have avoided problems through responsible financial management to feel that they are being unfairly penalized."
That term, "moral hazard," is a loaded one. It refers to the real risk that whatever government does will end up encouraging people to be irresponsible. Government cannot intervene in the market without picking winners and losers, and that's what has me the most worried about McCain's mortgage buyout.
How would he determine what the new value of a mortgaged home should be? Would the federal government begin acting like your local county assessor, gathering information about homes comparable to yours and what they sold for recently? Or, if the government didn't want to open new assessment offices in every city in the nation, would it just pick some arbitrary figure? What would that do to stabilize home values nationwide?
The truth is, falling home prices alone didn't cause people to default on their mortgages. My home has lost value, too, but I'm not in default. Nor should a 6.1 percent unemployment rate signal a drastic increase in defaults.
People stop paying mortgages for one of two reasons. Either they have lost the ability to pay, or doing so no longer is economically advantageous. When home prices fall, it is the latter, not the former, that comes into play.
Adding one bailout to another would be like tossing aspirins at someone with a self-inflicted gunshot wound, then sending the rest of us the bill.
Jay Evensen is editor of the Deseret News editorial page. E-mail: even@desnews.com. Visit his blog at deseretnews.com/blogs