Clinton, Bush share wrong idea on mortgages

She who would be president excoriates, as Democratic presidential candidates must, the current president and almost all his works. But she and he largely agree regarding the sub-prime mortgage problem. Granted, she greeted his response to it with the cri de coeur without which Democrats would be speechless: "More!" She upped his ante by proposing a moratorium, for 90 days, on foreclosures. But the crux of her proposal is the crux of his -- a selective five-year freeze on the rates of subprime adjustable-rate mortgages.

Hillary Clinton already is intimating that a seven-year freeze might be needed. Let the auction begin. Although the freeze of adjustable mortgage rates amounts to a revision of perhaps hundreds of thousands of contracts, it will help a relatively small number of people. And it will not help scrupulous borrowers who have scrimped and sacrificed to fulfill the obligations of their contracts.

According to Treasury Secretary Hank Paulson, 93 percent of American mortgages are paid on time. At most, 15 percent of recent "resets" -- mortgage rate increases -- have resulted in foreclosures. Alan Reynolds of the Cato Institute says that only about a third of adjustable-rate mortgages are with sub-prime borrowers and barely half of subprime mortgages have variable rates.

Clinton perhaps regrets that the plan the president has enabled and endorsed is voluntary. Today's liberalism, combining tolerance and statism, cares less what happens than that it be mandatory. But the plan is not entirely voluntary: Many people who own mortgage-backed securities might lose less because of the plan, but they did not participate in formulating it.

Clinton says the rate freeze should last "until the mortgages have been converted into affordable, fixed-rate loans." What does "affordable" mean? Paulson says: "Homes in foreclosure can pose costs for whole neighborhoods, as crime goes up and property values decline. Avoiding preventable foreclosures, then, is in the interest of all homeowners." But all foreclosures are "preventable" if all mortgage contracts can be revised.

Speaking ill of lenders began when homo sapiens acquired language, hence it is unsurprising that many people who until recently were criticizing lenders for not making money available to marginally qualified borrowers are now caustic about lenders who complied. Clinton is fluent in the language of liberalism, aka Victimspeak, so, denouncing "Wall Street," she says families were "lured into risky mortgages" and "led into bad situations" by those who knew better. So, lenders knew their loans would not be fully repaid?

Jesse Jackson speaks of "victims of aggressive mortgage brokers." But given that foreclosure is usually a net loss for all parties to the transaction, what explains the "aggression"? The president says: "The homeowners deserve our help." But why "deserve"?

Perhaps Washington's intervention in the sub-prime problem reveals the tiny tip of an enormous new entitlement: People who voluntarily run a risk, betting that they will escape unscathed, are entitled to government-organized amelioration when they lose their bets.

© 2007, Washington Post Writers Group