Charles 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.