Posted on 05/13/2008 3:03:32 PM PDT by BGHater
The House passed two bills attempting to rehabilitate the housing and mortgage market this week. There doesn't seem to be any shortage of criticism and blame for the bad decisions, and rightly so. Lenders and banks do share much of the blame for the overheated market. Lending standards were relaxed, or even abandoned altogether, creating an exaggerated pool of homebuyers that led to ballooning home prices that many, especially real estate investors, expected to continue forever. Now that the bubble has burst, the losses are staggering.
However, many in Washington fail to realize it was government intervention that brought on the current economic malaise in the first place. The Federal Reserve’s artificially low interest rates created the loose, easy credit that ignited a voracious appetite in the banks for borrowers. People made these lending and buying decisions based on market conditions that were wildly manipulated by government. But part of sound financial management should be recognizing untenable or falsified economic conditions and adjusting risk accordingly. Many banks failed to do that and are now looking to taxpayers to pick up the pieces. This is wrong-headed and unfair, but Congress is attempting to do it anyway.
These housing bills address the crisis in exactly the wrong way, by seeking to hide the problem with more disastrous government bail-outs and interventions. One measure, HR 5830 the Federal Housing Administration (FHA) Housing Stabilization and Homeowner Retention Act would allow the FHA to guarantee as much as $300 billion worth of refinanced home loans for those facing threat of foreclosure. HR 5818 the Neighborhood Stabilization Act, would provide $15 billion in loans and grants to localities to purchase and renovate foreclosed homes with the object of then selling or renting out those homes. Thankfully, President Bush has vowed to veto both of these bills. It is neither morally right nor fiscally wise to socialize private losses in this way.
The solution is for government to stop micromanaging the economy and let the market adjust, as painful as that will be for some. We should not force taxpayers, including renters and more frugal homeowners, to switch places with the speculators and take on those same risks that bankrupted them. It is a terrible idea to spread the financial crisis any wider or deeper than it already is, and to prolong the agony years into the future. Socializing the losses now will only create more unintended consequences that will give new excuses for further government interventions in the future. This is how government grows - by claiming to correct the mistakes it earlier created, all the while constantly shaking down the taxpayer. The market needs a chance to correct itself, and Congress needs to avoid making the situation worse by pretending to ride to the rescue.
He’s half right,
The other half of the problem was government letting Wall Street Police themselves. It wasn’t the government who said the securitization of the subprime mortgages were investment grade.
“his international perspective remains painfully lacking and, yes, naive. “
Whats wrong in demanding that congress must declare war.
it has been 7 years now - not enought time?
oh please.
Ron Paul’s Foreign Policy POV is nearly identical to the way Bush campaigned in 2000 and what most Republicans believed until the Neo-cons took over the party early in his administration and begin pushing for Iraq Nation building. Go look up and read the text of the Bush/Gore debates if you don’t believe me. Bush painted Gore as the nation builder and Gore readily took that title. Bush whined about spending 1.6 billion in nation building once during Clinton.
The Gramm-Leach-Bliley Act contributed to the housing bubble. Clinton signed this bill that scrapped the Glass-Steagall Act in 1999, at least the part that separated investment banks and commercial banks.
I think you’ll find that this opened the door to securitizing mortgages and treating them simply as investments. Divorcing the writing of mortgages from owning them is a huge invitation to fraudulent appraisals, loans to the unqualified, and the whole train of abuses that fueled the bubble.
"Isolationist" is not the same thing as "non-interventionist."
Sorry, but I don’t see the distinction.
Heh heh heh. = D
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.