Immortally Stupid

 

Kevin D. Williamson once wrote that when the government does stupid, it does immortally stupid. In a concerted effort to prove him right, the government is cranking up its sub-prime mortgage machine again. According to The Washington Post:

In 2019, there is more government-backed housing debt than at any other point in U.S. history, according to data from the Urban Institute. Taxpayers are shouldering much of the risk, while a growing number of homeowners face debt payments that amount to nearly half of their monthly income, a threshold many experts consider too steep.

Roughly 30 percent of the loans Fannie Mae guaranteed last year exceeded this level,… At the FHA, 57 percent of the loans it insured breached the high-risk echelon,…

As the great American philosopher, Ron White, once said, “You can’t fix stupid.”

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There are 17 comments.

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  1. Arahant Member
    Arahant
    @Arahant

    Not again. 🤦‍♂️

    • #1
  2. JoelB Member
    JoelB
    @JoelB

    And this drives up housing prices, because getting a larger loan is easier, which drives up prices..

    • #2
  3. Arahant Member
    Arahant
    @Arahant

    JoelB (View Comment):

    And this drives up housing prices, because getting a larger loan is easier, which drives up prices..

    Which is probably the point and who this policy is sponsored by.

    • #3
  4. Richard Fulmer Inactive
    Richard Fulmer
    @RichardFulmer

    Arahant (View Comment):

    JoelB (View Comment):

    And this drives up housing prices, because getting a larger loan is easier, which drives up prices..

    Which is probably the point and who this policy is sponsored by.

    The point of government interventions in the housing market appears to be to drive up demand and limit supply, thereby causing prices to soar.

    Policies that drive up demand:

    • Artificiality low interest rates
    • Tax write-offs for mortgage interest payments
    • Down payment subsidies
    • Requirements that Freddie Mac and Fannie Mae purchase sub-prime home loans from loan originators
    • Rent control
    •  Federal mortgage insurance
    •  Federal flood insurance (beach house anyone?)

    Policies that limit supply:

    • Zoning laws
    • Green space requirements
    • Multi-family housing bans and restrictions
    •  Rent Control (a twofer)
    • #4
  5. tigerlily Member
    tigerlily
    @tigerlily

    It seems we learned nothing from the 2008 crash.

    • #5
  6. Richard Finlay Inactive
    Richard Finlay
    @RichardFinlay

    tigerlily (View Comment):

    It seems we learned nothing from the 2008 crash.

    Perhaps the permanent staff of the FHA and Fannie Mae learned 2008 very well and want the economy to crash before the 2020 election.

    • #6
  7. Richard Finlay Inactive
    Richard Finlay
    @RichardFinlay

    I mean, it worked in 2008, didn’t it?

    • #7
  8. Mountie Coolidge
    Mountie
    @Mountie

    Time to option up. 

    • #8
  9. thelonious Member
    thelonious
    @thelonious

    Richard Finlay (View Comment):

    I mean, it worked in 2008, didn’t it?

    For the banks it worked out alright.

    • #9
  10. Muleskinner, Weasel Wrangler Member
    Muleskinner, Weasel Wrangler
    @Muleskinner

    Richard Fulmer (View Comment):

    Arahant (View Comment):

    JoelB (View Comment):

    And this drives up housing prices, because getting a larger loan is easier, which drives up prices..

    Which is probably the point and who this policy is sponsored by.

    The point of government interventions in the housing market appears to be to drive up demand and limit supply, thereby causing prices to soar.

    Policies that drive up demand:

    • Artificiality low interest rates
    • Tax write-offs for mortgage interest payments
    • Down payment subsidies
    • Requirements that Freddie Mac and Fannie Mae purchase sub-prime home loans from loan originators
    • Rent control
    • Federal mortgage insurance
    • Federal flood insurance (beach house anyone?)

    Policies that limit supply:

    • Zoning laws
    • Green space requirements
    • Multi-family housing bans and restrictions
    • Rent Control (a twofer)

    Notice that the local governments’ policies are offsetting federal government’s policies, and put the federal treasury at risk (National money pit). The left hand clearly doesn’t know what the right hand is doing, or maybe it does and takes full advantage.

    • #10
  11. Tex929rr Coolidge
    Tex929rr
    @Tex929rr

    Doesn’t the left’s entire schtick amount to “it’ll work this time”?

    • #11
  12. Midget Faded Rattlesnake Member
    Midget Faded Rattlesnake
    @Midge

    Richard Fulmer: Kevin D. Williamson once wrote that when the government does stupid, it does immortally stupid. In a concerted effort to prove him right, the government is cranking up its sub-prime mortgage machine again.

    Because of a Ricochet bug, a post on 20th-century housing policy that I tried to post earlier is only up today, making today Housing Thursday, I guess!

    The immortal — even immoral — stupidity has been underway since at least 1934, when the National Housing Act created the FHA.

    • #12
  13. Stina Inactive
    Stina
    @CM

    thelonious (View Comment):

    Richard Finlay (View Comment):

    I mean, it worked in 2008, didn’t it?

    For the banks it worked out alright.

    It probably worked out well for people off-loading extra real-estate, too.

    I wonder if I’ll have enough cash on hand to buy after the next crash.

    • #13
  14. Richard Finlay Inactive
    Richard Finlay
    @RichardFinlay

    Stina (View Comment):

    thelonious (View Comment):

    Richard Finlay (View Comment):

    I mean, it worked in 2008, didn’t it?

    For the banks it worked out alright.

    It probably worked out well for people off-loading extra real-estate, too.

    I wonder if I’ll have enough cash on hand to buy after the next crash.

    You may not have to worry about it. After the crash President Hillary-clone will see to it that private property and ‘excessive’ wealth are historical concepts.

    • #14
  15. Stad Coolidge
    Stad
    @Stad

    The problem is someone somewhere decided “The American Dream” must include owning your own single family home.  Because many individuals had (and still do have) that definition in mind, it made sense for politicians to cater to them as a voting block.  Throw in this thing called The Depression, and you can see why the FHA would be created.

    Fast forward to the modern period, then add a racial imbalance in home ownership and the seeds of a crisis are planted (sub-prime mortgages and the housing bubble).

    I don’t think it’s a case of not learning from the past.  I think it’s a case of “We’re gonna keep trying it until we get it right.”

    • #15
  16. Midget Faded Rattlesnake Member
    Midget Faded Rattlesnake
    @Midge

    Stad (View Comment):

    The problem is someone somewhere decided “The American Dream” must include owning your own single family home.

    That someone was Woodrow Wilson’s Labor Department — out of fear, upon witnessing the Russian Revolution, that any American not also a homeowner would turn communist.

    • #16
  17. Richard Fulmer Inactive
    Richard Fulmer
    @RichardFulmer

    The government creates problems  every time it ignores the rule of law requirement that people be treated equally under the law.  In this case, they’ve created terrible financial issues by granting special privileges to homeowners and to the poor.  The tradition goes back at least to 1619 when the first slaves were brought to our shores, and we still haven’t learned.

    • #17
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