Soak the rich!

There's a Sword of Damocles hanging over the head of the U.S. economy - a huge number of adjustable-rate mortgages are about to reset from their low low "teaser" rates to more normal rates next year. That means a whole lot of middle-class and poor people who bought their homes because they expected the price to go up will get soaked. If you think this year's subprime meltdown was ugly, wait til you see '08!

So in order to avoid this, some in the U.S. government are talking about a bailout of sorts. They plan to freeze that low teaser rate for several more years. This, of course, will hit banks hard, as well as people who bought all those CDOs (whose rates of return are tied to mortgage loan repayments), so Wall Street is lobbying against the teaser freeze. But it'll bring a lot of relief to a lot of poor and middle-class people who (dare I say it, unwisely) thought their house really was their number 1 asset.

There's been a lot of complaining recently about "capitalism for the poor, socialism for the rich" - the idea that poor people are left to suffer the consequences of their bad decisions, while finance folks and big corporations get bailed out when they mess up. Well, this sure looks like the opposite (although finance companies would also be somewhat hurt by defaults that would happen in the absence of a bailout). For once, the rich might get soaked instead of the poor. Only a die-hard free-marketer - who'd like to see everyone get soaked when they mess up - would be unhappy with that outcome.