Foreclosures Serve a Vital Purpose

Published July 1, 2008

Maybe the American people will luck out and the Senate’s foreclosure prevention attempt will go the way of comprehensive immigration reform. (“As Foreclosures Escalate,” July 1) The crux of the solution the Senate is offering with this bill is, “The system is broke, so let’s break it again!”

The housing market collapsed because people took out mortgages even though they could not afford them. The federal government aided them in this endeavor with a combination of low interest rates from the Federal Reserve and President Bush’s “Ownership Society” initiative.

Since the crisis began, the market has tried to correct for the government’s failure; for several months, the price system has been flushing out of the housing market those people who bought homes and could not pay for them. This process should be allowed to run its course. Securing mortgages with public funds does not eliminate the troublesome debt. It simply forces the debt onto taxpayers.

Foreclosures are the result of poor decisions on the part of both borrowers and lenders, and Congress should refrain from adding another poor decision to the already destructive mix.

Ryan Krause ([email protected]) is a legislative specialist intern at The Heartland Institute in Chicago, Illinois.