Commentary

Tilting Homeowner Rules Seems Unfair

By Will Wilkinson
This article appeared on Marketplace on February 25, 2009

Love him or hate him, Rick Santelli’s now infamous on-air rant has touched a nerve. Shouting from the trading floor of the commodities exchange in Chicago, CNBC’s Santelli asked: “How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills?” The traders behind Santelli lustily booed, and I’m sure some viewers watching at home booed along with them.

Small protests have cropped up in Seattle, Denver, Kansas and elsewhere as groups of disaffected taxpayers gather to decry the Wall Street bailouts, the stimulus package, and the newly proposed housing reforms. Maybe these are a bunch of ideological spoilsports mad they lost the last election, but I don’t think this small flame of populist resentment should be so casually dismissed.

Fairness means a level playing field and a stable set of rules. The rules structure our decisions. They’re inputs to our strategies in the game of life. Changing rules mid-game tilts the playing field. Those who planned around the old rules aren’t wrong to feel the change is unfair.

The housing bill, for example, would help homeowners with negative equity by reducing their mortgage payments. This has left many who settled for something smaller and more affordable, or those who decided to rent rather than take a risk on a house, feeling a bit ripped off.

It’s not just that some of us get bailouts, while some of us don’t. It’s that millions of Americans who played prudently, according to the old rules, end up footing the bill. And that really does seem unfair.

It may be that trying times call for extraordinary measures that are bound to leave some of us unhappy. But the more dramatic an intervention into the economy, the more it rewrites the rules and the more it tilts the field. Some people will be thrown off their game. Some people are going to cry foul.

Media Appearance Will Wilkinson explains why even a small flame of populist resentment shouldn’t be ignored on Marketplace (Februrary 25, 2009) [MP3]

Will Wilkinson is a research fellow at the Cato Institute.