Ben Bernanke and Hank Paulson have proven that they understand the concept of moral hazard. Wherever the government and Fed have stepped in, they've vacated management and erased shareholder wealth. If upcoming bailouts maintain this discipline, it will be the institutions and the functions they perform, rather than the wicked, that the people will have rescued to mutual benefit.
And what about the "innocent taxpayer", who seems to make a cameo appearance in every stump speech? Please. The teeth of the mortgage-backed equity now gobbling government IOUs may be complex financial instruments, but the stomach is a taxpayer who broke a contract. A taxpayer may be innocent of or an accomplice to present evils, but the taxpayer, collectively, is both. This bailout may smell a bit like socialism, but it certainly isn't plunder.
Well, the author is partly correct. The incorrect part? I would be willing to bet that many of the people who have been getting mortgages and not paying them are people who are probably not paying all that much in taxes. These are probably the people who bought houses for the sole purpose of being able to deduct mortgage interest from their taxes. These are people who should have been renting. They are not innocent. I, on the other hand, and many other prudent renters, are innocent. We actually helped the economy by (1) not committing to debt that we couldn't pay, and (2) not seeking ownership and thereby not enhancing the demand (or speculation for continued upward movement of demand) for housing that caused the bubble, and credit crisis, and now, the disaster that is our financial system. And we've paid our taxes dutifully, like good little citizens, and now we're all going to be funding this bailout, while these jerks who had to go and buy a house get off scott free.
I propose that we renters, who did not take part in the reckless, selfish homeowner lovefest, should be rewarded by either not having to pay any more taxes, or getting to live in foreclosed properties for free! They should at least get rid of the mortgage interest deduction in favor of a renter's deduction. I mean, come on, throw us a bone.
Now that would be fair. And of course, that's why it would never happen.