Saturday, January 17, 2009

Are we Rewarding the Financial Irresponsible

I was sitting in traffic one morning and I started to recall a conversation between me, my wife and a few other people around 2002.  My wife asked a question something along the line, how is everybody affording all of these things.  Everybody being our neighbors, and things being in-ground pools, vinyl fences, pavers, new cars, and many other luxuries.   I stated, I guess they make loans and are in debt up to their eyeballs.  I went on to say that I can not live that way and what if something happens were people can not pay their debt.  Someone chimed in and said but everyone is in debt up to their eyeballs and what could happen to everyone.  

At the time I thought to myself that is no way to look at it.  Now with the bailout of financial institutions to big to fail and individuals who borrowed more than they can repay being bailed out one way or another, I am wondering who is better off.  I think the answer is those of us who acted responsible.  

For one thing if I get laid off from my job I have enough savings to get me through for 6 months or more.  The debt I am carrying is more than I would like, but manageable. Those individuals who made financial mistakes can not feel good about themselves and must have more stress than those who were responsible.  The ultimate test is would you want to trade places with one of the individuals going into foreclosure even if they are getting a deal.  I certainly would not.  

So the lesson is when mass numbers of people are irresponsible you can count on a government bailout but those who acted responsible will be in a better place.  

Tell us what you think.  Is the bailouts fair and do you wish you ran up your credit card or bought a house you could not afford?


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