The Law of Unintended Consequences

Floor Speech

THE LAW OF UNINTENDED CONSEQUENCES -- (House of Representatives - March 03, 2009)

Mr. McCLINTOCK. Madam Speaker, I'd like to offer a word of caution about the law of unintended consequences.

Last week, this House passed the administration's proposal to allow homeowners to force banks to reduce the size of their mortgages and their interest payments.

Well, there are millions of families, including my own I might add, who now owe more on our mortgages than our homes are worth, and yet more than 90 percent of homeowners continue to make our mortgage payments in hopes of better days to come.

Question: How many of these people who have been faithfully making their mortgage payments will now take advantage of this new law to reduce their mortgage debt by tens or even hundreds of thousands of dollars?

And while we're at it, here's another question. As these borrowers decide to cash in on this windfall, how many additional banks will fold as the value of these otherwise perfectly sound mortgages is crammed down by this new law?

And a final question: How high will the surviving banks raise their interest rates and down payment requirements to protect themselves against future governmental interventions?

I'm afraid that all we will have done is to create a society where fewer banks will be able to make loans and fewer home buyers will be able to access loans and produce an additional downward spiral in home values.

Madam Speaker, the law of unintended consequences is beyond Congress' jurisdiction, and we would do well to heed it.

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