The mess called "U.S Housing Bailout"

From IHT.com:

"NEW YORK: The long-awaited U.S. housing bailout was finally unveiled Wednesday.

At a speech in Phoenix, Arizona, a signature real estate boomtown gone bust, President Barack Obama explained his plan to reduce foreclosures.

The key to understanding the plan is to remember that there are two very different groups of homeowners who are at risk of foreclosure.

The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million U.S. households - and rising - fall into this category. Without help, they will lose their homes.

The second group is far larger. It is made up of the 14 million households that can afford their monthly payments but whose homes are worth less than the value of their mortgages. In real estate parlance, they are underwater. If they want to stay in their homes, they will have no trouble doing so. But some may choose to walk away voluntarily, rather than continuing to make payments on an investment that may never pay off."

They govt is currently looking at favouring the first group, the article goes on to say. Irrespective of which group the govt favours, what is getting lost in the arguments is the group which is losing out when govt passes this helping hand around - the group of people who made sensible economic decisions. This stimulus is now going to create a situation, where you stand to benefit if you'd made a really really bad decision about buying your house! It would make good economic sense for more of the second group people to try and get themselves seen as belonging to the first group, or to just start walking away from the loans. The more worse off you can show yourself to be, the greater your chance of qualifying for a helping hand. It is actually a motivation for people, even those that are doing okay for themselves, to not work as hard on their jobs, and instead work on getting themselves qualified for the bounty being handed out - a much easier route than working their way out of this mess.

I absolutely dislike the proposal for the habits it is promoting - politicians helping people with their consumer debt. This will give rise to the scenario where hard working, frugal people, see their spendthrift neighbours having lived lavishly in credit for the past few years, and now when their way of living backfires, Uncle Sam comes and gives them a helping hand, while the hardworkers continue to toil without respite. On the contrary, it is the hardworking Mr.Frugal, who is paying with his taxes for the house loan of his neighbour Mr. Spendthrift. This is injustice.