Did The Bailouts Really Help The Mortgage Industry?

By Jim Micheals

It is becoming increasingly clear that the 2008 bailouts were an abysmal failure in repairing the mortgage industry.

Although many Americans have opposed the Housing and Banking Bailouts from the get-go, there are many others that have since grown disenchanted with the idea of using their hard earned tax dollars to compensate executives for their careless (and often greed-driven) mistakes. Not only have the the bailouts failed to repair the mortgage industry, they have caused a great deal of damage.

Why the Bailout was Morally Irresponsible

Whether or not the negative effects of the mortgage industry bailout could have been predicted, it is clear that the bailout was a bad idea from the start. For one thing, according to several national polls conducted in 2008, the majority of the American public was against the idea of bailing out the mortgage industry. Most of those who opposed the idea felt that it was unfair to make taxpayers pay for bad mortgages. Many predicted (correctly) that the greedy bankers and careless homeowners who landed themselves in sticky situations would unfairly benefit from the bailout. On top of this, in an already suffering economy, most Americans could not afford to pay for the greed, selfishness and carelessness of others.

Why the Bailout was Fiscally Irresponsible

In addition to the moral irresponsibility of the bailout, it is clear that the actions taken were also fiscally irresponsible. First of all, the idea of a bailout meant inevitably propping up housing prices that were already highly inflated. This in turn meant that houses risked becoming increasingly unaffordable for the average American interested in becoming a homeowner.

In addition, the idea of a bailout created a backward incentive for bankers and mortgage brokers to continue to act irresponsibly. Having already made massive amounts of money over the past decade, those responsible for the housing crisis were further rewarded for their misdeeds in the form of bailout money. Bankers and mortgage brokers were encouraged, then, to continue the behaviors that had made them so much money for the past several years (at the expense of the American public, of course!).

Finally, whether or not it was successful, a financial bailout went against all the principles the United States stands for as a free market economy. It was a major government interference in the free market, and worse yet, was funded entirely by the American taxpayers.

The Results of the Bailout

As predicted, the bailout of the mortgage industry has hindered growth in this area of the economy and prevented many Americans from investing in homes. These effects have been damaging enough on their own, but worse is the extent to which they have led to other serious problems. As the mortgage industry began to fall apart, many Americans lost their jobs. Lacking the income to pay the bills, several of these people were forced into home foreclosure. This in turn has led to a downward spiral, which has kept the economy stagnant and the unemployment rate unbelievably high.

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