Bailouts

Federal bailouts can seem very unfair when you look at it from the perspective of a single family. We provide disaster assistance for large groups of people who have been affected, but not for individuals who have been similarly affected in isolation. So if 500 families lose their homes to a fire or flood, we offer each of those 500 families relief that we don’t offer to 1 family who loses their home. Yet if you’ve lost your home, you have the same needs as anyone else who has lost their home. Why do we only help some people in that situation and not everyone?

The reason is that as a society, we don’t really care about any of those families at all. We only care about the effect of the disaster on the rest of us. What if too many people are suddenly made homeless, or lose their jobs, or lose their investments? That can cause ripples of disruptions as economic effects spread. If a city block burns, the regional economy can absorb the effects. If a city burns, that’s a much larger problem for the regional economy, so we look to stop the effects from spreading by providing disaster assistance.

With disasters, we’ve decided that the way to stop those effects from spreading is to provide assistance to large groups of people. With the drug trade, we’ve decided that the way to stop those effects from spreading is to incarcerate large groups of people. These different approaches both have the common purpose of trying to maintain economic stability in the rest of society.

The current attempts to stop the foreclosure rate from accelerating beyond control are generating a lot of self-righteous complaints from people who are not facing rate resets and want to know why they aren’t being rewarded for having chosen a fixed-rate mortgage. They see some people benefiting from this attempt at disaster control and feel that it’s unfair. It is unfair, as are all federal bailouts. The surprising part of this bailout is that in the process of trying to maintain economic stability, we may actually help poor and minority populations since they are the ones who are most likely to face foreclosure otherwise. That would be a good outcome, and an unusual one. It also rouses two suspicions in my mind: first, that the mortgage bailout details will be arranged in such a way as to increase long-term debt for these poor and minority populations; second, that the reason some people are so willing to complain about the unfairness of this bailout is because of who may be helped.