Obama to Help Hurting Home Owners. Is this another bailout?

I wrote this a couple of days ago and thought it would be worth posting here. This is the link to the original article from The Washington Post and this is the link to the thread on The Moderate Voice

The article is about Obama's plan to bailout homeowners and the fairness of this bailout to people that were responsible enough to cut back their standard of living to not need a bailout. I wrote the following in the comments section.

The problem is that we were pretending to be an unregulated free market economy when we were really working under corporate socialism policies (a tax payer backed financial system). This crisis is where theory and reality finally collided and now we have to find a fair way to get out of it.

In theory, at least mine, we should have let the free market prevail and allow our financial industry to collapse. We couldn't because this most likely would have sent our country into another great depression....and not many wanted that. Now here we are on the other end with the people that took those terrible loans when they had no business acquiring a loan in the first place. Free market theory, and maybe morality, would say they should lose their homes, in the same way lenders should have lost their companies, for making irresponsible decisions. If we allow this to happen, we'll send thousands of families into bankruptcy and destroy homes values across the nation.

It appears to me that we have the same dynamics going on here on both sides of the crisis....punishment of individuals for making irresponsible decisions vs the immediate effect of that punishment on society as a whole. (I think we can all agree that the long term precedent of tax payer funded bailouts is a bad thing)

We decided to save the economy and only punish one company. Now we have to decide how much we want to save home owners and values...in the short term...and who should be punished. By bailing out these home owners, we are basically punishing people like the author (even though his home value might be helped by these bailouts).

It is hard to say we should be tougher on these home owners, especially considering that we are talking about "main street" people, not wall street who we just gifted billions of dollars. But it is easier to be harder on them because the immediate effect on society from people losing their homes is not as dire.

What is fair? It is hard to say...considering the place we started from was by no means theoretically consistent and a lot of people made a lot of money because of it.

Quick side note...
I think this is only a black and white issue for people that either support bailing out everyone or people that would have been okay with no bailouts and risking another great depression. If a person was okay with any kind of bailout for the financial industry, then I don't believe it is ideologically honest, maybe consistent is a better word, to be completely against helping irresponsible home owners.

cross posted at Word Press The Moderate American