3 cheers for Bush mortgage bail-out!

[sniglet]

I know that many bubble-sitters are lamenting the growing efforts of policy makers to bail out the real-estate market, but the reality is that assisting the struggling market is an imperative of our governments.



Sure, bail-outs (in whatever form they may be) can create moral hazard that could lead to some future problems, but it is unthinkable to just allow the decimation of a large portion of the economy, and almost certain severe depresson, to unfold. If it is in the power of governments to prevent economic catastrophe, then they must take action to do so, no matter how ugly the means.

At the very least, policy makers have a duty to try and reduce the pain.

Bill Gross made this same point recently, and it has merit.

Should a doctor refuse to treat people with an infectious disease who also have other serious ailments because to do so would slowly erode the eficacy of existing anti-biotics (as the pathogen evolves to be immune)? No. You don't let someone die on the table if a cure is available just because the use of that cure right now might hurt a greater number of people in the future.

Even if this person might die from some other pre-existing disease anyway, a doctor will give them the best treatment that is available. You then deal with treating the people who contract this disease in the future, once the anti-biotics no longer function, as best you can at that time. You can't let yourself worry about the long-term conseqences when treating someone today.

There is a low probability that the various real-estate/finance industry bail-outs being engineered will succeed (we are in a DEEP hole). The cures being administered will likely have minimal impact. Nevertheless, just as the doctor is obglicated to ATTEMPT treating the terminally ill, our governments have a similar obligation.

If nothing else, voters will never forgiven a leader who stands by saying that there is nothing they can do as the economy slides off the face of a cliff. Just look at the derision with which Hoover is viewed to this day, whereas an activist President like Roosevelt (who likely made the depression worse) is a saintly hero. Rightly or wrongly, people want to think their leaders "care", and are doing whatever it takes to make things right.

Or to put it back in medical terms, people will prefer doctors who humour them, and provide medicines for their ailments, even if the treatments don't work. By contrast, doctors who just tell you that there isn't any good treatment and you should just stay in bed are shunned.

[rose-colored-coolaid]

[SunTzu]

[SeattleMoose]

[perfectfire]

[perplexd]

[Eleua]

[sniglet]

[Eleua]

[rose-colored-coolaid]