When You Pay For Others Mistakes

That seems to be the case with the unfolding subprime crisis. Wall Street Journal reported

"Mortgage Pain Hits Prudent Borrowers - Some of the costs of cleaning up the nation's mortgage crisis are beginning to hit innocent bystanders: people who pay their bills on time and avoid excessive debt.

Fannie Mae, the giant government-sponsored mortgage investor, last week raised costs for many borrowers by quietly adding a 0.25% up-front charge on all new mortgages that it buys or guarantees."

So it is fair that you pay the price for others follies?

In my opinion - it may not be fair but it is real. Natural state of any system is equilibrium. The subprime mess needs to be purged from the system and unfortunately it will affect everyone in the system. Also, lets not forget that the innocent bystander benefited from the bull market, which was fueled to some degree by low interest rates and appreciating house prices. So if you benefited from the excess - maybe its time to give some back. As long as you gained more than what you pay back - you come out ahead. Isn't that the goal of investing?


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