contracts

Todd Zwicki has a take on government rewriting mortgage contracts over at WSJ this morning.

The implications of this are obvious and potentially severe: The uncertainty will exacerbate the already existing uncertainty in the financial system, further freezing credit markets.

If Congress wants to deal with the rising number of foreclosures, it should not create a new mess by converting the mortgage crisis into a bankruptcy crisis. Doing so will open the door to a host of unintended consequences that will further freeze credit markets, raise interest rates for new home buyers, and spread the mortgage contagion to other types of consumer credit. Congress needs to reject this plan and look for better solutions.

 Reminds me of another warning about government rewriting contracts I read somewhere . . . .

Anytime you hear someone say that the way to fix the “foreclosure crisis” is to “modify loans,” what you are really hearing is a desire for the government to destroy the concept of contracts.

People, for good or bad, made voluntary decisions to sign mortgage contracts which they, for whatever reason, cannot afford.  If such a contract was obtained by fraud, there is already a mechanism in place to address this; it's called suing the crap out of them.

If, however, people voluntarily jumped in over their head, then they do not deserve the drastic action being contemplated by people like Rep. Conyers.

Why do I say drastic?  Because the entire concept of contracts will be potentially voided by a move like this.