John McCain was in Orange County on Tuesday and he addressed the housing/mortgage crisis.  Although he didn't outline any specific strategies (and although listening to him speak is not at all a pleasant experience...making me long for Obama), I did agree with a few things he said.

1.  "It's not the duty of government to bail out and reward those who act irresponsibly whether they're big banks or small borrowers."

2.  "Lenders ended up violating the basic rule of banking: Don't lend money to people who can't pay it back."

I agree that we should not be bailing out banks and mortgage lenders who bet on the market by providing no document, no down loans to folks who could not otherwise qualify for a loan.  These banks and lenders were counting on an ever increasing valuation to protect them from losses.

In a similar way, borrowers were convinced that the housing market would go up, up, up--allowing them to reap big gains from appreciation without the need for much investment.

Both parties were wrong.

I don't agree with some in congress who've called for forgiveness of the portion of the mortgage that is over current market value.  Would we expect the borrower to pay more on a mortgage when the market value goes up?  Why would we expect the bank to assume such a loss, then?

I do agree with McCain's call to mortgage industry leaders to work with their borrowers, focusing on keeping them in their homes by helping them to restructure their debt.

There will be people who lose homes in this process.  There will be banks who lose money.  That's the natural cost of "betting on the margin." 

If we don't allow people or corporations to suffer the consequences of their actions, how can we expect anyone to act with integrity and accountability?

I may not be voting for McCain, but he got this one right.

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