The Real Cost

Let's be honest, the "foreclosure abuse" settlement announced yesterday was basically the product of a shakedown of five of the country's largest banks by the Obama Administration.  While the agreement comes with a big price tag, the dollar amount is the least of its costs. 

But first folks, please understand that no bank will ever pay any part of the $25 billion settlement.  Basic economics:  It's their customers who will pay; it's only their customers who can pay.

And who are these customers?  Why, they're the paying customers of course, exactly the same people who borrowed only what they could afford in the first place, and who, despite the hard times, continue to pony up to their obligations routinely.

Which brings us to the real costs, two of'em, of the agreement, as well as of every bailout that preceded it.

First, it encourages precisely the same irresponsible behavior it's supposed to rectify.  Rescued once, and in a big way, from suffering the consequences of risky action, you can be sure it will occur again...and again...and again...and again, unless and until those consequences are in fact suffered.

Second, to the injury of making the very people who acted responsibly underwrite the recklessness of those who did not, it adds this insult:  "You fools!  You stupid fools!  Look at us, we had our cake and ate it too.  You acted the adult, you played by the rules, and what did it get you?  Will you ever learn?"

Will we?