Steven Geoffrey Gieseler of the Pacific Legal Foundation makes an excellent point in decrying the great amount of attention paid to homeowner victims of subprime mortgages in the current presidential campaign relative to those who have lost their homes to eminent domain (hat tip: Tim Sandefur of PLF on Eminent Domain):
As the campaign for the presidency unfolds, candidates from both parties are squabbling over who can bail out defaulting homeowners first, and most. The mortgage crisis has become a central issue of the Democratic and Republican primaries. “Saving homes” is now a necessary mantra for everyone seeking the White House. Problem is, they’re all trying to save the wrong homes….
As stressful as losing a home to foreclosure may be, most such homeowners at a minimum share in the blame for their predicaments. After all, many agreed to loan terms that amounted to little more than gambles that, it turns out, haven’t paid off.
In contrast, those who lose their homes to their federal, state, or local governments via eminent domain for private purposes are victims in the truest sense of the word. These people have done nothing wrong other than live on plots of land that more politically connected parties, and the politicians they’re connected to, have decided the owners are no longer worthy of keeping.
I would add one more point to Gieseler’s compelling argument. Even if you do believe that those defaulting on subprime mortgages are innocent victims, any government bailout for them is likely to create innocent victims of its own: The taxpayers who will be forced to pay for it. This is doubly unfair to recent homebuyers who stayed within their means, and may now be punished for their financial rectitude by being taxed to bail out those who were more reckless. If you want banks and other lenders to pay for the bailout, that too will generate innocent victims. If lenders are forced to bail out defaulting homebuyers, they are likely to tighten up credit requirements for future buyers, thereby making homeownership less accessible to the poor and lower middle class.
On the other hand, we can help the victims of Kelo-style “economic development” takings with little or no collateral damage to innocent third parties. Not only are such condemnations damaging to property owners, they also tend to harm the general public by spending public funds on projects that usually provide less in the way of economic growth than would have occurred if the previous owners had been left alone by the government. I discuss the reasons why in great detail in this article. Banning economic development takings is a win-win for both threatened property owners and the general public. The same can’t be said for proposals to bail out subprime borrowers.