The Cost of Outlawing Failure

Blared across the front page of the Wall Street Journal last week was this headline that Ben Bernanke's boyhood home has been foreclosed and sold. I guess they are shooting for the focus on how this is illustrative of how this hits everyone, even the Fed chairman..........blah, blah, blah.

But note what the headline did not say. "Fed Chairman's House Destroyed" or "Fed Chairman's House Razed and Salt Sown in the Ground" Someone bought the house; someone will live in it again, someone will BENEFIT from the fact that they were able to pay less for it and now will use this house. I'm sort of surprised the Wall Street Journal, the supposedly free market paper, missed this point.

Of course the previous owners lost out - the house used to be theirs, and now it isn't. In this particular instance the market didn't work in a positive sum game (the way it usually does). Instead there was a winner and a loser, which is unfortunate for one side.

But one side is better off. One side is going to take that asset and use it productively. And it's happening throughout the economy. First home buyers (who are QUALIFIED) have one of the best environments in years.

Shoppers face all sorts of advantages be it either as innocent as taking advantage of sales throughout the economy or as unfortunate as picking over the retail remains of a bankrupt firm. Even in bankruptcy someone benefits if we let the market work.

I worry about all of these plans to "keep people in their homes" or "keep GM viable" because while the owners and investors in those firms are better off, the potential bargain hunters are not. That's something the smart guys ought to remember when they start talking about saving the buggy industry.