Thursday, April 15, 2010

Bailed out mortgages still default - GM will follow

Bad business models lead to failure. This is true for individuals or corporations. This is not a bad thing. If a mortgage holder can't afford their mortgage, they should find suitable housing they CAN afford. Handing them money may not address the underlying issues that made the note "not affordable". I would be willing to bet that some of those being bailed out, are unwilling to make lifestyle changes necessary to stay in their home. It sounds cold, but reality usually is.

In the case of GM, we really just bailed out the $70 an hour assembly line worker. Without adjusting the underlying problems (the $70/hour worker), GM will just burn through the billions, and be back at the trough for more.

In the end, why should hard working taxpayers have to support these sometimes self inflicted failures? What happened to Creative Destruction, and hard lessons learned well?
"The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government's modification program nearly doubled in March, continuing a trend that could undermine the entire program."

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