Reinflating the Housing Bubble: Making the Same Mistake Again
by Veronique de RugyCharles Gasparino does a very nice job exposing Freddie Mac, Fannie Mae, and their advocates for the destructive forces that they are. Everyone, even Obama for a while, recognizes that at the heart of the financial markets meltdown was the collapse in the US housing market, which itself was a bubble enabled in various ways by government programs explicitly designed to increase the percentage of people owning homes.
Whether through the Community Reinvestment Act or through a relentless Federal Reserve bank policy of next-to-zero percent interest rates or guarantees of Freddie Mac and Fannie Mae (and major incentives to them to buy any mortgage on secondary markets no matter how dubiously documented or financed), it’s clear that pro-home-ownership policies massively increased housing prices and risky loans.
Yet what blows my mind, is that currently the government is again pumping billions of dollars into various programs to increase home ownership rates and to stabilize or increase home values throughout the country.
Nevermind that it will be easier now that the government effectively owns Freddie and Fannie. On top of that, almost every single week Obama announces a new program that just promote the idea that everyone is entitled to a house they really can’t afford.
See this piece in the Wall Street Journal at the end of September:
“The Obama administration is close to committing as much as $35 billion to help beleaguered state and local housing agencies continue to provide mortgages to low- and moderate-income families, according to administration officials.
The move would further cement the government’s role in propping up the housing market even as some lawmakers push to curb spending at a time of rising debt.
The effort, which could be announced as early as this week, is aimed at relieving pressure on government-operated housing finance agencies, which have been struggling to find funding amid the downturn. These agencies, or HFAs, are a small part of the housing market but are critical to many first-time and low-income home buyers, who can get lower-rate mortgages through an HFA than they could through a private-sector lender.”
Why can’t people in government understand that the alternative to being a home owner isn’t to live in the street? Renting is okay, you know.
Finally, for more great work on the causes of the financial meltdown see Mercatus Center’s Arnold Kling’s piece here and Todd Zywiki’s one here.
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18 Comments
Perhaps it is good that the government get behind this again and pump additional billions into an already collapsed market. I see that the median home price for homes in Detroit is approximately $7,100.00. Barrack could go to the Detroit market, bundle those foreclosed homes and move ACORN patrons from all over the country to Detroit to live in subsidized housing. Once there, Andy Stern and the SEIU could organize them and put them to wrok at Government Motors (GM). In that light, it is a win/win deal for everyone. They could sell the junk paper back to China and Saudi Arabia, and we'll all be one big happy family. It would make US all citizens of the world, with Barrack as Emperor for life.
Oops!
I see my plan is already flawed. I said "put them to work"………
That'll never happen.
It's part and parcel with how our government (dis)functions these days:
If at first you don't succeed, fail fail again.
you must watch this video to see and hear why ACORN has pushed home ownership as a RIGHT, not a priviledge for working folks…..
http://www.youtube.com/watch?v=SLOJFD6Wtnk&feature=player_embedded
one of my thoughts in the same vein, is to have all people recieving any type of subsidy — section 8 housing, welfare, food stamps, and soon Obama heatlth care…..must have to go to work for us taxpayers in exchange for the freebies…
For an example….cleaning toilets, sweeping floors or picking up trash at Federal office buildings, public works buildings, etc all across America….and put in at least 20 or 30 hours a week based on how much they are getting subsidized for free…..that way we get our monies worth, and they get a job…..albeit in exchange for all the freebies paid for by the working folks……seem fair??? You know, if you add up all these subsidies, a smart person could game the system for about 45,000 to 55,000 per year….not bad to live in America…..hugh??????
While I see your points, your plan is as flawed as my idea of putting them to work. Under you plan, having them volunteer to work off their freebies, could you immediately envision how long the new line would be at the Post Office, as we waited for them to shuffle back and forth to get stamps? God forbid they'd have to count and make change………….
And, on top of this, they are using the same economic reasoning in the health care insurance scheme. Flood the market with consumers who are not able to afford the product, and prohibit accurate assessment of risk, and therefore pricing of the risk. It wasn't just the collapse of the housing market that caused the financial crisis, but also the improper rating of the bundled securities, which caused insufficient pricing of the derivatives which insured against default. Granted the end games are slightly different, but the means are the same.
My question: Are they really that stupid? or Are they really that malicious?
So with the markets not yet bottomed out, with jobs still being lost and personal finances unstable, when liquidity is king, they want those who can be most in need to be tied down to an albatross they would not be able to sell for just break-even for well over a year?
Of course when real good-paying jobs start being created again, so we hope, they will likely be away from the heavily-unionized areas. Why not tie down those in most need of good jobs to keep them from going non-union? This also preserves the economically-distressed areas, which can point to the rising "risk of home foreclosure" numbers as more evidence of the "urgent need" for federal assistance.
Ah heck, once they tie up their available cash, these new buyers will soon "urgently need" immediate federal aid. More "stimulus" for "the working poor"? At least the promised mega-expansion of Medicaid will let them avoid worrying about their health care costs, since it will be free. Every little bit helps when you're a new home owner, right?
It's premature to discuss solutions until we admit the problem. That our federal government operates without respect for Constitutional limits. If we don't have Constitutional limits, we have truly lost our republic just as old Ben Franklin warned. When you start trying to figure out how to fix that, we can talk.
Like the first time this is being intentionlly to create a bubble then a collapse and then more government control.
Nothing mysterious about it at all.
These are really evil people, period.
I started typing up a fancy post linking mortgages to Banks to Insurance ompanies… then I realized it all came down to one thing… IT ALL JUST SUCKS! No matter how much re realize what they're doing is stupid. We are stuck commenting and complaining until we do something. We have to run for office, or something…
This time I will sell at the right time!
[...] This post was mentioned on Twitter by Juli , Big Government. Big Government said: Reinflating the Housing Bubble: Making the Same Mistake Again: Charles Gasparino does a very nice job exposing .. http://bit.ly/3SDKa6 [...]
This is more of the same old, same old to give the government control over foreclosed land. Then sell it to the Chinese and other overseas interests in order to settle the debt. The Dems are giving away our country in order to establish one party rule. The stimulus was nothing more than a payback to Dems' special interests and those who put Fauxbama in power. If even they admit the stimulus is coming to an end and yet only 14% has been spent thus far, where is the rest going? How many pockets are being lined, how many offshore accounts are being filled and how much of what's left is going to Fauxbama's reelection campaign and that of other Dems?
Uhhhh…. As you know, Cowboy, I am from the metro Detroit area…for many decades. And the LAST thing the residents of that once great city want to do is work….. I watched the decline over 40 years….. OBAMA stash rules in the city….. A truly disgusting place to visit….bring a gun if you do… You will need it.
To those driven by pure ideology, reality and common sense don't come into play in their decision making process. When said ideology has been a proven failure for over a century, it dooms them to make the same bad decisions over and over.
Unless of course, as others have pointed out, they want to destroy the economy, then these bad decisions are intentional.
I'm not sure which is the case. Probably a combination of the two.
I grew up in Detroit Metro area too RightSide and I so agree with you. It used to be a great city then when the riots happened, it started to slip into the quicksand. The slums with pink cadillacs parked out front, lazy lazy people who wanted only to rob others and the Liberals only made it worse. This city is an example of what will happen to the rest of the country if we let it.
What I don't get is why do they elect the same losers over and over again??? Boggles the mind!
[...] Economics, Obama, The Economy trackback It’s like they’re trying to ruin the economy. They’re creating another housing bubble, in exactly the same way as last time – and we haven’t even recovered from the last one! The horrific debt of the stimulus [...]