Fed Chairman's principal reduction idea is crazy-talk.



From Virginia’s Jim Duncan:

Honor and personal responsibility should have a place in our society. Sadly, that seems not to be the case.

Oh, this morning is not the time to get me started on that one, but I am moving on.

Alert reader and inquisitive mind Jakob asked me in an email yesterday what I thought about Ben Bernanke’s gentle nudging to lenders to forgive a portion of principal balances on troubled home loans. I had to let the question stew overnight for two reasons: I was really busy yesterday, and I needed to avoid an emotional response. It is what my father-in-law called the “24-hour rule,” and for a girl prone to spontaneity, I have found it an essential one.

Hat tip to Jim Duncan for saying what I wanted to say and for saving me a few brain cells in the process.

In fact, the more I think about it, the idea of rewarding those who fail to take responsibility and to live up to their commitments is just crazy-talk, a concept that should be snuffed out by those of us who play by the rules and live by our decisions. Sure, you can make the argument that the banks would be making a sound business decision, and the result would be reduced losses and a healthier bottom line. But if we were to allow this kind of corporate thinking to prevail, where would we be?

Imagine a world where someone could buy a dress from Nordstrom and return it after the event, no questions asked, resulting in higher overall prices for those who chose not to return a worn item. Consider a society where people would shoplift sundry items from the drug store, resulting in a mark-up on similar goods sold to the honest shoppers. Soon, hospitals would start charging more for their treatment of patients to compensate for non-payment from the patients who can’t or don’t pay. Reckless drivers and uninsured motorists could start causing insurance companies to raise their premium rates.

Heck, real estate agents might even argue that costs associated with marketing homes for clients who change their minds and with showing buyers homes every weekend for three months to have them walk into an open house and sign with the listing agent are necessarily factored into the fees they charge their most loyal customers.

It’s crazy-talk, I tell you. And it’s business as usual, like it or not.

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