Friday, April 05, 2013

Ayn Rand Live?

It's as if Ayn Rand is writing history, more than 20 years after her death.  An email from Pelsmin:

Every now and then I hear someone say this entire presidency is aimed at destroying America. Personally, I think that’s extreme, and it’s really aimed at “moving us to our proper place in the world,” which is less dramatic but also directionally misguided.

But then I read this story in today’s WaPo, explaining how the Obama administration wants to encourage aggressive mortgage lending to low-credit/low income buyers. They are working to assure banks that they won’t be held responsible for failed mortgages as long as they conform to FHA guidelines, and that the government (taxpayers) will repay on defaults.

Under FHA guidelines “a borrower can get a home loan with a credit score as low as 500 or a down payment as small as 3.5 percent.” The DOJ is getting involved. The only difference I can find with 2008 is that back then the government was pushing home loans with nothing down to high-risk individuals, with an implicit backing of Fannie Mae, and now the government is pushing home loans with nothing down to high-risk individuals, with an explicit backing from FHA. I didn’t think Washington could stun me. But here we are, the ashes of the economy still warm, and they’re breaking out the matches and gasoline again. And is this possible: “since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans”? Do we again have banks operating under the moral hazard of making loans with government assurance of repayment? Also, what’s the logic of the statement “as young people move out of their parents’ homes and start their own households, they will be forced to rent rather than buy, meaning less construction and housing activity.” I guess this is somehow possible, but don’t they need to live somewhere besides the basement? So they will move into homes they own, or homes they rent. Construction will be needed for buildings occupied by owner or buildings occupied by renter. What am I missing? This is the most disturbing news story I have read in years. Really.

Phone call for Joe Tham.  You doubted me.  What do you say now?


John Thacker said...

The most charitable explanation for the construction claim I can figure is a claim that rental housing is somehow cheaper and smaller than owner occupied housing.

Thomas W said...

3.5% down payment is nothing new. FHA has been offering 3% down for over 20 years -- I bought my house in 1990 with a 3% down FHA loan.

Anonymous said...

So what is next? Are they going to push it farther then last time when a knew housing bubble fails to ignite despite the guarantees?

Maybe they could start bulldozing all those foreclosed homes as part of a stimulus package in order to jump start knew construction.

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