OK, now let’s settle down.

Sitting down? I think this is a bad idea, too! Just for somewhat more boring reasons.

I just read where a court allowed Delphi to void its contractual obligations to fund its workers health care and retirement. Why no socialist panic here? Because we have a system in this country that allows for this–called bankruptcy. Courts routinely void and modify contracts, and everybody moves on.

Sometimes the rules of the game favor creditors (see President Bush’s bankruptcy “reform”). Sometimes they favor debtors (such as this and similar proposals in Congress). Such is the pendulum of politics. Still–the concept is hardly socialist.

The problem with the new proposal is that it creates a permanent solution to a temporary problem. The temporary problem is the collapse of the housing market. If we accept that bailouts are the solution du jour (and let’s at least accept it for the sake of this argument, since the bailout train has left the station anyway), then we can stomach banks, auto companies and mortgagors getting some help even if they do not deserve any help.

And in regard to mortgages, this is what President Obama is doing with some of the TARP money. He has provided incentives to banks to renegotiate loans with their borrowers. And since foreclosure has become somewhat worthless to the banks (why foreclose on a house you can’t sell?), this should provide sufficient incentive.

At some point, the TARP money runs out, and hopefully, so does the housing collapse, and we are restored to some sort of normal conditions.

The problem with the proposal at hand is that it shifts costs to successful borrowers forever. There is no need to do this, especially when there are temporary solutions available.

Boring? Yes. Socialist? No. Still, oddly, we agree.