It is not every day that I have to admit that I have over-estimated the intelligence of politicians, economists, and “journalists” (I should probably have also used quotation marks for the so-called economists). But today is such a day:
“President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession. In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default. Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.”
How does any rational person react to this insanity? The government is intentionally leading us into another crisis. But we already knew that was going to happen. So let’s restate it: The government is intentionally leading us into the same crisis that devastated us before. It is encouraging malinvestment that they hope will lead to another boom that can only lead to another crash.
We read insanity after insanity. For example: “It is very difficult for people of low and moderate incomes to refinance or buy homes.” That would be a subset of the secret truth: “It is very difficult for people of low and moderate incomes to afford expensive things.” But that is exactly what keeps the prices of housing as affordable as possible. If all these people could buy houses, this would drive the price of housing up. Housing would become less affordable! But our government believes in “trickle down” economics where a housing boom attract more housing construction with jobs in real estate and construction. But these jobs will all collapse and the government will pretend the reason for the bust is a mystery.
This is the difference between the market and the state as predatory lender. The market gives people an incentive to lower the price of homes as much as possible so that as many people as possible can afford housing. The state ropes poor people into debts so that, for a time, the price of housing becomes less affordable, and then it crashes when the debts finally catch up with us. The state’s agents consider the latter process to be “economic growth.” These people are like doctors who think tumors are good for people.
Another nugget of wisdom: “Before the crisis, about 40 percent of home buyers were first-time purchasers. That’s down to 30 percent.” This is treated as if it were only a matter of economic ability. But maybe people don’t want to own homes as much as they used to. If I was some high school senior in California or Florida who watched my parents suffer through an upside-down mortgage in 2007, I might have a different attitude toward home-ownership once I landed my first real job as an adult. Maybe a large number of people have decided that it is better to let the landlord deal with the risk in the real estate market.
“The administration’s efforts come in the midst of a housing market that has been surging for the past year but that has been delivering most of the benefits to established homeowners with high credit scores or to investors who have been behind a significant number of new purchases.”
Right. These people, the very people who Obama’s taxes are punishing and damaging the most, must not be allowed to invest in and rent out property. Rather than respect these people and see them as an asset, the state wants to encourage bad debts to the poor. The only people who will benefit are the “too big to fail” Wall Street operators.
One final point: Remember that the only reason we have a potential bubble in housing is because of Bernanke’s “Quantitative Easing.” Without easy money and super-low interest rates investors would never take these risks and attempts to push banks to loans on those who can’t repay would simply fail immediately. Behind all the other crimes lies the Federal Reserve as the enabler of them all.