Want to know why handholding and coddling people and businesses is bad? This blog has a cornucopia of information regarding the subprime nonsense that's been plaguing the news lately. Below is an interesting tidbit:

Quote

“Aside from violating the sanctity of a contract and scaring off potential investors, what’s the good news here? ‘It’s a big misconception to think that (mortgage) resets are responsible for the delinquencies,’ said Andy Laperriere, a managing director at the ISI Group in Washington.”

“Of the subprime loans made in 2006 and scheduled to reset in 2008, some 25 percent are already delinquent, he said. ‘What’s driving the delinquencies is that people can’t afford the initial payments,’ Laperriere said.”

“That’s a problem Paulson’s plan won’t fix.”

My personal thoughts?

1) Every entity that loans money to people without figuring out if they can pay it should go bankrupt.
2) Every person who takes a loan they can't possibly afford desserves to foreclose.

The reason why this is bad for the rest of us, even if we're not investors or homeowners, is because who is buying all these loans? The answer to that question is the states. Municipalities (states, cities, etc) buy up these loans repackaged as bonds to support their pension obligations. Who is going to pay to put more money into those funds? Furthermore, this "rate reset freeze" plan is going to be paid for by individual states.

So in other words, the rest of us will eventually pay it, only it'll show up as increased sales tax, public transportation and land taxes. In short, those of us whom are fiscally responsible will have to pay to keep the wonderful world of bottomless lines of credit going, because if it stops so does this entire economy.