If a parent repeatedly rewarded their child every time they behaved badly, society would deem that parent unfit. However when it's the government handing out your hard-earned tax dollars to a group of citizens who made bad decisions, sanity somehow takes a leave of absence.

Over the last few years some people, using easy credit and adjustable-rate mortgages (ARMs), bought more home than they could afford on a bet to make easy profits from rising home prices. What nanny-state politicians don't want to admit is that most of these people knew what they were getting into. They just thought that housing prices were going to keep going up ad infinitum.

Most of the predicament in the mortgage market is the result of ARMs, which frequently offer low introductory interest rates. Once the rate adjusts after a few years, many homeowners can't meet their monthly payments. Nearly two million homeowners have ARMs that will adjust by the end of 2008. Of those, the Federal Housing Administration estimates that five-hundred thousand could go into foreclosure.

But don't worry, be happy. Politicians to the rescue! Since the borrowers in question are potential voters, it can't be their fault. Hillary Clinton is now pitching her multi-billion dollar bailout plan for the "victims" of "unscrupulous" mortgage brokers who act "dishonestly and try to take advantage of people". And what will fix the problem? Why, more government bureaucracy and more of our money, of course.

Barack Obama calls lenders "predatory" and says the real victims in this crisis are the millions of borrowers who followed the rules, whose only crime was taking out mortgages that lenders told them they could afford. I guess if a lender says I can afford a loan, then that absolves me from THINKING.

If we listened to the politicians, we'd be preparing for the next Great Depression. Do we need the federal government to protect us from ourselves? Of course not. Let the marketplace, not government, deal with this problem.

When we get beyond the politico-speak and look at the economics of this issue, it's clear the mortgage market is correcting itself and that a government bailout would only make matters worse. Let's put this in perspective. For all of the politicians' hysteria, less than fifteen percent of the forty-four million mortgages in America are in the subprime category. As a total of all mortgages, foreclosure rates are 0.6 percent, up slightly from 0.5 percent last year. These foreclosures barely have the potential for wholesale economic disaster. Losses are estimated to be $35 billion at most -- comparable to a stock market decline of 0.2 percent.

The current mortgage and real estate markets are textbook examples of a market imbalance and its predictable correction. Lenders that bet heavily on subprime foreclosure bailout loans, such as Ameriquest, New Century, Ownit, and Mortgage Lenders Network lost their bets and are now in deep financial trouble or bankrupt. In the short term the subprime mortgage market will be painful for those who took the risk. But this will inevitably lead to a healthier market in the long run.

The real threat to the economy is not the foreclosure rate, but that government will overreact, especially since their motives are typically driven by impulsive politicians, who are desperately trying to "out compassion" each other. Chances are, by the time hearings are held and legislation is passed, the market correction will be over. Unfortunately the new red tape and government spending to address a short-term market imbalance would be permanent.

A federal bailout with taxpayer money creates what economists call a moral hazard, which would only encourage more risky loans, paving the way for the next financial crisis. Government should not be in business to protect us from ourselves. More government rules, regulations and laws will not make the blind see; you cannot legislate stupidity.

Blum, chairman and chief executive officer of Digital Canal Corp., is a former chairman of the Dubuque County Republican Party. Readers may comment on this feature via e-mail at doubletake@wcinet.com or by posting a comment below the article on THonline.com.