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An Impassioned Plea for Responsibility


Are contracts no longer to be viewed as law, but rather are to be viewed as nothing other than mere whim?


Yesterday Dennis Gartman voiced his disdain and concern over Hank Paulson's absurd mortgage-bailout plan. His comments are an eloquent extension of the crony capitalism I've decried ever since the whole notion of bailing out mortgage-related products first popped up -- and thus, I've decided to include some of them here:

We wonder who it shall be that will make the decisions involved as to which mortgagee shall be helped out and which shall be left behind. What shall become of those mortgagees who had paid up their mortgages; accepted the newer, higher rates; and have been consistent in meeting their obligations?... Are contracts no longer to be viewed as law, but rather are to be viewed as nothing other than mere whim? If we are to allow mortgagees who are in trouble to stand down and have their problems taken up by taxpayers, what then of contracts anywhere? Can we demand foreign governments, or foreign companies, or foreign individuals stand by their commitments to Americans if Americans will not stand by their commitments to one another?

No one wants to see people put out from their homes... But to have the government step in and mandate that homeowners be allowed, under penalty of law, to remain in their homes and for banks to be forced to accommodate is legal and philosophical madness. This is a country of law, which believes in the sanctity of contract agreed upon by those who've consented to the binding nature of that contract. But to have government force the issue -- and worse, to mandate [that] taxpayer funds be used to do so -- is morally wrong, with implications that shall redound into any and all other economic concerns."

The Perils of Paulson

While on the subject of moral hazard and Paulson's loony ideas, I would like to share a quote from "Bye-Bye, Free-Market Global Capitalism," an article written by AIG's Bernard Connolly (forwarded to me by the Lord of the Dark Matter):

"In the past few days, one has seen a subprime plan from Paulson that massively increases moral hazard and seems to follow resolutely Socialist principles of 'to each according to his needs,' as several commentators have remarked, and arguably overthrows not just 200 years of contract law in the U.S. but the application in the U.S. of English common law provisions on contract going back much further than a mere 200 years. This plan indeed incorporates aspects of a horrible new New Deal."

I think those two gentlemen have said all that needs saying on this subject.

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