hopperbach


Mighty Senate to ease our housing fears

Worried about your house? Fear not, mortals. Once again your government is coming to rescue you from the sinister forces of the mortgage industry:

U.S. Senate finance committee leaders said they had reached an agreement on a bill to provide about $500 million in help for troubled U.S. mortgage holders.

The primary goal here is to keep people in their homes,” said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee.

Thank you Democrat Senator Dodd. People of the dependency class that make up your voter base are no doubt wiping tears of gratitude from their eyes after being reassured that once again big bro has their backs.

The money would go to expand offerings of government-insured mortgages, The New York Times reported Tuesday.

The plan also has tentative Bush administration approval because it doesn’t tap directly into taxpayer dollars.

The program would be financed by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

Sounds just peachy. But notice the wording — this plan “doesn’t tap directly into taxpayer dollars”. This means that we get to hang onto our green… for now. But what if Freddie and Fannie one day find themselves insolvent? Who will bail them out? That’s right, ultimately we the people will once again foot the bill for the boneheaded investments of others. Not officially stated but… let’s face it, we’re supporting this turkey.

Nobel Laureate in economics, Vernon L. Smith agrees with this assumption and in fact believes that these two agencies are at the root of housing bubbles in the first place. In a WSJ article from Dec. 2007, he had this to say.

Under the Senate deal, the start-up funds would come instead from an affordable-housing fund capitalized by mortgage giants Fannie Mae and Freddie Mac, which were created by the government but are owned by public stockholders. This august body has long forgotten that it set the stage for housing bubbles by creating those implicitly taxpayer-backed agencies, Fannie Mae and Freddie Mac, as housing lenders of last resort.

By implicitly taxpayer-backed agencies, Smith means that you and me are the unspoken, unofficial safety net should these two mortgage giants find themselves in trouble. Who else is going to do it? Warren Buffet? George Soros? Ha!

And be assured that any bill that congress passes to “fix” this mess will ultimately be a temporary, election year band-aid. It’ll be like duct tape on a plumbing leak — might hold it long enough for the plumber to… geez, I’m starting to sound like Ross Perot here.

So what’s the answer, then? We are in a correction — let it play it’s course. Sure it will be a bumpy ride but it is ultimately a healthy thing when idiots are weeded out of any market. Conversely it is very unhealthy to reward stupid investors. It only encourages them to make more… say it with me… stupid investments.

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