The internet is atwitter about CNBC's Rick Santelli meltdown over the support for some of the homeowners caught in the housing bubble. Some want to make him a star, some see him as a buffoon. I'm clearly with those who see him as an idiot.
The primary point of those who oppose the homeowner bailout is that taxpayers shouldn't be in the business of helping people who made stupid decisions.
The primary point of those who oppose the homeowner bailout is that taxpayers shouldn't be in the business of helping people who made stupid decisions.
Of course we do that all the time. President Obama is evoking FDR's comment - "Suppose my neighbor's home catches fire, and I have a length of garden hose. I don't say to him 'Neighbor, my garden hose cost me $15 ." (Which wasn't a New Deal comment, but a comment about Lend-Lease.). We have fire departments who will come put out a fire at your house, even if it was started because you had bad wiring in your fish tank.
We do all kinds of things, at the governmental level, to help our neighbors. However, the appropriate level of support is the basis for the fundemental political tension in our country. Where do we draw the line?
I just watched the Frontline overview of how the Federal government got involved in underwriting the housing bubble for the great captains of capital. The show is called Inside the Meltdown, and I highly recommend it. Key players, save the Secretary of the Treasury and Chair of the Federal Reserve, are interviewed. As are journalists from the Wall Street Journal to CNBC to the New York Times. I can't imagine a more credible overview that could be presented, in an hour, of how the federal government got into the banking business.
And here's the thing. We decided we were in the save-your-ass business last October when the Congress passed and President Bush signed the bailout bill. Shortly thereafter, the federal goverment invested $250 Billion in the top nine banks in this country to prop them up.
So, now, 11% of the $700 Billion set aside to resurrect our economy is going to be used to help homeowners. And the fire analogy still serves us. If my neighbor's house goes into forclosure and sits empty, the value of my house falls. Just as if a fire in their house isn't put out, my house is at risk.
The astonishing thing is that Santelli's rant has any traction at all. We're already in the game, the recipients of the cash so far have been the best and the brightest on Wall Street who created this mess by creating the market for sub-prime mortgages. The right wants to blame the homeowner who bought a garbage loan, but, oddly, let off the garbage salesman. Now we're spreading the love, lightly, down to 'Main St.'.
It's about time.