Wednesday, December 12, 2007

Choking off a correction

Here's a link to the Register's editorial on the Bushlet's subprime mortgage rate freeze program. The problem with such a program, even if it isn't mandatory, is that it doesn't allow the market to correct itself -- and it punishes those who were prudent enough not to try to buy a house they really couldn't afford or get involved in a subprime mortgage. Corrections can cause pain for a while as people pay for their imprudent decisions, but the pain is shorter than if government tries to stave it off through intervention. That only delays the correction, draws it out, and doesn't teach lessons that might prevent people making similar mistakes next time a boom seems as if it will go on forever.

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