Totally cool. An actual newspaper article about America’s favorite welfare program, government subsidized mortgages — and in The Boston Globe, no less:
Amid all the clamor about entitlement reform during the struggle to raise the debt ceiling, one enormous cost – and potential source of future savings – largely escaped scrutiny: the billions of dollars the United States spends to support the mortgage market. Even before the 2008 financial crisis, the government assumed the credit risk on most loans, which allowed banks to offer better rates, but ultimately left taxpayers footing the bill when the housing market collapsed: $138 billion and counting.
During the crisis, the government became even more involved in the mortgage market by rescuing Fannie Mae and Freddie Mac and agreeing to backstop larger loans. This furnished enough liquidity to prop up the housing market and helped bring about the low mortgage rates of the last three years. But getting in has proved much easier than getting out. Today, the government backs 95 percent of new loans, leaving taxpayers more exposed than ever.
That could finally be about to change. After next month, federal loan limits in expensive areas like Boston, New York, and Los Angeles are set to decline from $729,750 to $625,500. Had the lower limits applied last year, the government would have backed 50,000 fewer loans. But even this modest pullback may not happen. At the urging of homebuilders and realtors, lawmakers in both parties want to extend the higher limits, possibly for good. It’s an early skirmish in the larger battle over the government’s proper role in the mortgage market. And the issue isn’t just when to pull back, but whether to do so at all: Many Americans have come to regard cheap mortgages as an entitlement.
I am so ecstatic to see Fannie, Freddie, Ginnie and FHAVAUSDA properly identified as welfare programs — invented by rent-seeking Rotarian Socialists for the benefit of other rent-seeking Rotarian Socialists — that I’m finding it hard to kvetch.
Well, maybe not too hard. Look at this:
Liberals tend to support government intervention as a means of subsidizing home ownership for the poor and middle class; most conservatives would prefer to let private markets take over.
I cannot imagine who “most conservatives” might mean. The American economy has descended to a level where virtually every transaction is corrupted by rent-seeking — the payment of unearned compensation to some people, effected by the imposition of undeserved costs on others. Arguably, the actual ClowardPivenish strategy in post-war America has been to get everybody into the welfare system, in one way or another. But mortgage subsidies and the mortgage income tax deduction — nearly-universal welfare for the rich — don’t seem to have very many enemies, period, neither from the “liberal” nor “conservative” wings of the Rotarian Socialist party.
Want proof? Here’s a “conservative,” whose proposal outdoes even Karl Marx for being anti-economic:
[A] good idea for what to do next comes from Representative Gary Miller, a California Republican.
Miller is a real-estate developer and former builder, so his conservatism is leavened with actual experience. He’d like to merge Fannie and Freddie and keep them under the government’s auspices, while removing the profit imperative that got them into so much trouble. The merged companies would continue to buy mortgages and resell them to investors with explicit government backing. But that’s all they’d do. From the standpoint of someone buying a home, things wouldn’t seem much different.
Holy cow! It’s Manfred Fanfred of the Department of Motor Vehicles! What should we do about a mortgage subsidy system that is corrupt from the top down? Reorganize it to be corrupt from the bottom up, instead! Do you want to make big money in database mining? Mine mortgage bundles. Or mine the track records of particular loan officers or underwriters. You can take a piece of every bribe paid on your advice, maybe another piece on each resale as your predictions hold up. May god spare us from “experienced” Rotarian Socialists!
But: Here’s how you can tell that they are all Rotarian Socialists: Because they cannot even conceive of a free-market alternative to pandemic rent-seeking. It is completely beyond their ken that there is money to be made in lending (duh!) and any support system needed to keep money available — that is, a private secondary mortgage market — will arise spontaneously just as soon as it is profitable — as soon as it is permitted to be profitable by the elimination of government subsidies.
Will prosperous people get their interest rates subsidized by the tax-payers — that is, ultimately, by means of the auto-cannibalistic vampirism of their own money? No. Will rates be higher or lower? Hide and watch. Will opportunities for graft vanish? You betcha. Will this, just by itself, have a salutary effect on the real estate market, and on markets as a whole. Oh, yes! You can’t over-build if you can’t over-borrow.
An even better question: Does anything other than economic harm ever result from any sort of rent-seeking?
Other than Ron Paul, I don’t see much evidence that anyone in Washington knows anything at all about how — and why — free markets work. There could not be a better time to get governments at all levels out of real estate. There would be a shake out, of course, but given that state intrusions have already wrecked the real estate market, it’s hard to imagine that the shake-out could be much worse than the collapse has already been.
Oh, well. Tomorrow is another day. At least for today, mortgage subsidies have been loudly and publicly identified as welfare programs. If you don’t like the idea of being a rent-seeker, a welfare slave, a vampire feeding on your neighbors’ blood, now would be a good time to take a stand against them. If there really are congresscreeps who want to return at least some part of the free market to the residential real estate business, they need to hear from you.
Jon Bond says:
Ha ha… great read! And yes, there is money to be made in lending. I just wish these banks would lend when they should! I know a private lender that is doing quite well for himself these days. He started up shortly after the crash lending short term loans to rehabers. He is subsequently making a killing on it. Good industry to be in, just need to help these government peeps actually see what works!
August 20, 2011 — 6:21 am