The Tribune

EDITOR, The Tribune. DR RODGERS recently announced his remedy to save homes from foreclosure. In summary, he suggested: * "...reduce the Central Bank Prime Rate from 5.25 per cent to 2.25 per cent or lower..." * Banks "could reduce the principal on their troubled mortgages by 50 per cent..." * "...the Government should take immediate steps to establish a Foreclosure Trust Fund" ... of $150m. First, times are difficult and families losing their homes must be devastated, but to suggest that reducing the Prime Lending rate to 2 per cent would help save a home from foreclosure is not possible. The Nassau Institute worked the sums back in June 2011, and the results tell a different story. Secondly, to state that banks should reduce the principal of mortgages in default by 50 per cent is reckless. Banks lent money to the borrowers in good faith, and at market values. It is worth noting that banks here are not responsible for the world's economic woes. Third, Government has no money to establish a Foreclosure Trust Fund. As Milton Friedman is reported to have said, government has no money, they must take it from the taxpayer one way or another - taxes and/or debt, etc. It's always curious how so many people justifiably take issue with government programmes, yet believe they can design them and everything will work just fine. Freiderich Hayek called that The Fatal Conceit. He was right when noting: "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." It's difficult times like this when families should come together to see how they can best help each other. Sometimes foreclosure is the only option but some people have been lucky enough to move in with their family members and rent their home to keep the payments current. Banks also help if borrowers do not pretend they don't exist. The possibilities will vary with each circumstance. Even with his scheme, Dr Rodgers laments, "You can't save all of the mortgages. Some of them are going to go down because people have no jobs and no monies at all". Taking tax dollars from Bahamians so people in the political class and Civil Service can decide who they want to give it to is a dangerous precedent. It would be preferable for people with like minds to Dr. Rodgers risk some of their own money to be altruistic with. Maybe a private trust fund to help the less fortunate retain their homes is possible. That way it might be exempt of the political gamesmanship like so many other Government schemes in the past. Altruism with other people's money creates more problems than it solves. The Nassau Institute P.O. Box SS-6972, Nassau, March 7, 2012.