Life Isn't Like a Box of Chocolates

03/01/2010 12:01 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

There’s been a lot of talk about credit cards recently, as the new CARD Act took effect in an attempt to protect consumers from predatory card issuers.

It reminds me of the temptations of the candy stand in my building. At a certain time each day, the chocolates seem to just jump out of the racks into my purse (and my mouth). I certainly hope now that they’ve solved the credit temptations, Congress will act to protect me from those predatory chocolates.

But instead of attempting to protect consumers, why doesn’t Congress act to change the incentives? If they hadn’t subsidized Fannie Mae and Freddie Mac to make a profit on mortgages that would otherwise have been unaffordable, we wouldn’t be in quite the state of crisis in the housing market. 

Our lawmakers were wise enough to take away the deduction for credit card interest, but then they replaced it with incentives for consumers to convert borrowings to home equity loans. 

I’ll never forget quarterback Dan Marino’s pitch—or was it a pass?—for those loans back in the 1990s. Is it wise to take advice from a real pitchman to withdraw home equity for a new kitchen or a vacation? Thousands learned that answer the hard way, and they didn’t exactly score touchdowns.

Now it’s come out that Toyota was able to negotiate a better deal on an auto recall by “working” with its regulators. And that the Food and Drug Administration didn’t withdraw a drug that seems to clearly cause increased heart attacks when taken for diabetes, because they didn’t want to contradict their own earlier findings that the drug was safe. 

And talk about perverse incentives, just take a look at how banks are handling mortgage problems. Ordinary folks trying to hang on to their homes are told they must ruin their credit by defaulting on their loans before they get a chance to adjust their payments under the new Federal HAMP (modification) and HARP (refinancing) programs. This is the Catch-22 of a new generation—an incentive to simply walk away from taking responsibility.

Next thing you know, our government will be trying to protect us from Mother Nature, telling us they can control eons of global warming! Or that we should be changing the shape of a hot dog to prevent young kids from choking. Whatever happened to parental responsibility—or the idea that you should cut up food for little kids? 

In fact, whatever happened to personal responsibility, period? It’s one thing for our government to extend a hand to those who find themselves in the unemployment lines. After all, these people paid in taxes with the understanding that there would be some kind of security net in the depths of the business cycle. But when government creates more problems than it solves, it’s time for a change. 

What kind of changes would you make? Please join the conversation and have your say.

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