Does anyone in Washington pay attention to what has come before?
This week we learned the administration plans to strengthen the housing market. By maybe making it easier for millions of homeowners to refinance their mortgages at today’s low rates. Homeowners who have government-backed mortgages.
Bureaucrats are also looking into programs to encourage people to rent foreclosed or nearly foreclosed homes. Hoping this will shore-up housing prices.
A few questions: How did we get into the ginormous mess with housing? We got into it because Government interfered with the market. (Read about it in Gretchen Morganson’s new book Reckless Endangerment.)
No, greed by mortgage lenders was not the cause. It was the effect. The Carter administration decided minorities and poor people were not getting enough mortgages. It ordered banks to loosen lending standards. That is called interfering in the market. Bureaucrats – not banks - deciding who should get mortgages.
The Clinton administration broadened the program. The Bush administration added to it. Government forced banks to make bad loans. Forced them. It protected them through the Fannie and Freddie agencies. Fannie and Freddie lined the pockets of the politicians to keep this madness going. Barney Frank, Chris Dodd and others took the money and duly protected the circus.
It was massive interference in the market. For the sake of the happy ending. That is, that anyone who could make a thumbprint could qualify for a mortgage. What joy.
The happy ending has been a disaster. It nearly brought down the financial structure of the western world.
You might think the politicians learned a lesson from this debacle. Right. The administration wants to tamper with the market once more. Left alone, the market will gradually clear itself of foreclosed properties. Left alone, the market will decide who ought to get a mortgage and who should not. It will decide who should pay more and who should pay less. It won’t seem fair to some. And they will push politicians to make it more “fair”.
