Why the Government Shouldn't Be in the Real Estate Business
A Ricochet member posted this item on his Facebook page with an apposite comment: "Why the government shouldn't be in the real estate business: Buy high, sell low."
The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors--vulture funds.
These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.
You and I will not be allowed to participate.
I'm never sure whether to credit Facebook friends for tips like this: Facebook in principle is not a public forum, so it may not be something he intended the whole world to hear. On the other hand, I do want to give credit where it's due. So, friend, let me know.
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Aug '10
Re: Why the Government Shouldn't Be in the Real Estate Business
I have a lot to learn about economics, but it seems to me that they have, by fiat cloaked as policy, both forced the socialization of the the losses on us and denied access to the privatized gains from us. Is that the way of things here?
May '10
Re: Why the Government Shouldn't Be in the Real Estate Business
Anything that gets real estate out of the hands of Fannie and Freddie and into the private sector is fine by me. Maybe then we can let housing prices find their true market value instead of being artificially propped up.
Aug '10
Re: Why the Government Shouldn't Be in the Real Estate Business
Agreed. But shouldn't the sale of these properties be to the highest bidder - in an auction open to one and all?
Jul '11
Re: Why the Government Shouldn't Be in the Real Estate Business
Yes...and when the prices fall enough, these home will sell. That's true now and it was true before attempts to support their prices prolonged the recession. Some people would have lost a bet on real estate, and the buyer would have won. People who couldn't afford homes would have been able to at lower prices and the system would have been cleared by now, promoting recovery, job growth, tax revenues....the whole enchilada...IF our overseers had acted in the national interest.
Now, the houses will be sold at lower prices than earlier, the same losers will lose, but the economy is in the tank, and the favored intermediaries...Goldman and others....will get rich, again, on our nickel. The new buyers will buy at lower prices, but higher than then need to be, the difference being that transfer to the favored.
So much for "shared sacrifice." This deal stinks.
Sep '10
Re: Why the Government Shouldn't Be in the Real Estate Business
This is precisely why the government should not be in the business of buying and selling assets because there is always the potential for cronyism. That said, since they own them anyway they've got to sell and in most everything the ability to buy in bulk allows you to get a better price.
Apr '11
Re: Why the Government Shouldn't Be in the Real Estate Business
The sad thing is, the federal government will point at the money received from the sale as "money gained", glossing over any loss. This will be presented as a success in the ever-growing housing bust saga.
Mar '11
Re: Why the Government Shouldn't Be in the Real Estate Business
This is a very good working definition of how Fannie and Freddy operate; I can't believe they both weren't dissolved when this whole fiasco errupted.
Jul '11
Re: Why the Government Shouldn't Be in the Real Estate Business
How many people will realize this is just one giant scam.
Entity A should pay 100 million for X number of houses. Instead they bribe the seller prodigiously and pay 50 million.
Now A sells the homes at higher prices to people who were denied bidding on them.
Just awesome.
Mar '11
Re: Why the Government Shouldn't Be in the Real Estate Business
"I can't believe they both weren't dissolved when this whole fiasco errupted."
Raghuram Rajan explains why pretty well in Fault Lines and the reason is as simple as it is corrupt: both parties, for their own reason, see home ownership as a good in itself and as a palliative for other economic problems that are less popular to address.
Not only will this property be redistributed in some way that ultimately hurts the housing market, it also undermines the good actually owning a home does (a second order good, surely, and one that presupposes certain other core values: responsibility and practical wisdom, among them). The policy is not only an economically disastrous one, it helps undermine the moral grounding that, once upon a time, really did undergird the owning of a home and really did undergird the thinking of those who thought home ownership was part of the American dream (precisely because they presupposed the moral underpinning).
Wait....surely Dodd-Frank enacted regulation that will make it a requirement for banks to hold collateral against these new assets they will receive/sell to get them off their books so as to insulate them against future taxpayer bailouts, right?
Mar '11
Re: Why the Government Shouldn't Be in the Real Estate Business
Well, as an an unemployed school teacher with the majority of my personal assets tied up in a nice custom home on 2.5 acres just outside of Las Vegas I find it a bit hard to swallow that these institutions continue with impunity in their destructive ways.