Govt. Solution: Pressure to Renege on Contracts
The government sure has a funny prescription for restoring confidence in America's credit markets. It purports to solve the nation's credit crunch — a slowdown stemming from investors' loss of trust in instruments such as mortgage-backed securities — by pressuring millions of borrowers and lenders to renege on their contracts and bilk mortgage investors.
Unless there was fraud, both borrowers and lenders should be expected to live up to the terms of their contract, unless they mutually agree to changes. Innovations such as ARMs enabled many smart borrowers to improve their prospects by using the extra cash flow for purposes such as starting a business or getting a new degree. These responsible borrowers and their lenders should not be punished for the imprudence of others.
John Berlau of the Competitive Enterprise Institute, writing in USAToday