Tuesday, February 24, 2009

The Santelli Rant and Who's to Blame

I admit, when I first saw the rant above by Rick Santelli opposing the Obama mortgage plan, my emotions were stirred and I had to agree with the spirit of his frustration. People like Brian Beutler, Ryan Avent, and Matt Yglesias dismissed the rant in part because Santelli (and the traders who empathize with him) didn't publicly oppose the various bank bailouts. In the eyes of Beutler and Yglesias, Santelli and the traders were hypocrites and narrow-minded members of the wealthy class...always willing to blame the little guy (individual homeowners) but never refusing to accept a free money or political favors (i.e. the various bailouts). I think Yglesias' thoughts are neatly captured in this excerpt:

When someone applies for a mortgage, there are two parties to the transaction. On one side of it is a teacher or a blogger or an electrician or a lawyer or a nurse or a guy who manages a Home Depot. On the side is a guy who, for a living, as a professional, works in the “deciding on what terms to offer people mortgages” business who works, for a living, at a financial services business...That, to repeat, wasn’t the judgment of electricians and store managers; it was the judgment of people who were professional mortgage-offerers.

While Yglesias is happy to excoriate the big financial firms for being over-leveraged (borrowing more than they could pay back if housing values started to drop) because they should have known better, what Yglesias fails to address is the culpability of individual borrowers in their very own version of over-leveraging: applying for a mortgage that was beyond the amount they could reasonably afford. I think this is the crux of the Santelli/Yglesias divide.

Which is why, emotionally at least, I have to side with Santelli. Yes, it was tempting for individual homeowners to keep up with the Joneses, but individual adults cannot be expected to have no self-control over their temptations. Individual adults (wealthy, poor, or middle class) fell victim to their temptations and made stupid decisions. Yes, they were tempted (and it seems that the people doing the tempting sometimes broke the law), but they still made a bad decision. So why should the people who made good decisions have to pay for the people who made bad decisions?!?! That's how I feel from an emotional standpoint, at least.

Now, all that being said, I'm not an economist, so I can't really weigh in on whether Obama's mortgage plan makes sense for the overall US economy. But as an individual adult, it is extremely frustrating to think that there may be two sets of rules: one for the reckless and irresponsible and one for the calm and prudent.

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