Dan Gillmor

Journalist's Housing Rescue Idea: Reward Recklessness

The NY Times’ Joe Nocera, asks, “Shouldn’t We Rescue Housing?

Yes, there were lots of Americans who were not greedy or foolish during the housing bubble, and many resent the idea that their neighbors might get a bailout they don’t deserve. They need to get over themselves. If housing prices keep falling, many millions of additional homeowners will find themselves, through no fault of their own, with underwater mortgages. Besides, foreclosures damage property values for everyone, not just those losing their homes.

Through no fault of their own? Let’s unpack this.

If you borrowed to buy a house in one of the rapidly inflating markets during the past few years, you were playing the bubble game, too.

If you borrowed against the value of the house for a second mortgage for any reason at all, you were playing the bubble game.

If you are a long-term owner and were counting on the appreciation to finance your retirement or your bail-out to a place where homes were more affordable, you were playing the bubble.

His plan, which many others have floated in recent days, is designed to put our kids on the hook for the prolificacy of people who were encouraged to be spendthrifts. But it’s a direct slap in the face to a huge group of other people.

If you are a renter who didn’t jump into the market because you understood that to do so would be reckless, you are, in Nocera’s world, a dupe. You’ve been overpaying for your rent due to inflated home values, and while you waited for sanity to return so you might be able to afford to borrow to buy a home, you now learn that you’re still out of luck.

This plan would freeze in place a system that encouraged greed, and penalize those of us who waited for markets to become more sane. It turns out that being responsible in this insane nation is to be naive. That message will penetrate throughout the culture as the scope of all these bailouts — which exempt people who did the right thing — becomes clear.