Americans for Prosperity Lead Coalition Against Subprime Bailout

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A consumer-advocacy group called the Americans for Prosperity is spearheading a coalition effort of approximately 15 groups in an anti-government subprime mortgage bailout campaign. The campaign kicked off with a letter to all members of Congress calling for the government to resist bailing out home owners who took losing gambles on subprime mortgages.

From the letter (read the whole thing here as a PDF):

We specifically oppose creating or expanding programs to provide explicit government loan guarantees, allowing government-sponsored enterprises (which enjoy an implicit taxpayer guarantee) to purchase more loans, direct-aid to borrowers, granting bankruptcy judges the power to rewrite mortgage contracts, and new regulatory requirements that go beyond disclosure to determinations of suitability.

Sub-prime mortgage lenders and their customers entered into agreements both understood to contain certain risks. Lenders and holders of mortgage-backed securities knew their risk was the possibility that borrowers may not have the means to make their payments once those payments increased.

Some borrowers chose risky loans and purchased houses they otherwise could not afford in the traditional mortgage market. Others chose these loans as a wealth management tool and to help them achieve financial goals such as starting a business. People are free to speculate as to their future earnings and ability to repay mortgages as well as speculate on the future of housing prices. Government should not step in simply because some people took risks that didn?t work out.

I have to say that this letter seems better thought out than the mortgage reform bill proposed by Barney Frank and the petition that has been circulating the internet calling for changes to the mortgage industry. Personally, I think that there is a balance that must be struck in actions taken by the government; but the balance has to be towards a less-is-more approach. I have always maintained that the laws on the books are good; the enforcement is miserable. Fix the enforcement and the laws become meaningful again.

What do you think?