The federal government’s intervention in the private economy is best described like this: they mandate their social engineering agenda on a sector of the economy, blow up that sector, parachute in as the firefighter to save the industry with their solutions, and finally resume the original laws that engendered the need for the fix. Nowhere has this circuitous insanity been more evident than in the housing market.
The federal involvement in housing, via the monstrosities know ad Freddie Mac and Fannie Mae, is what created the asset bubbles, propelled the growth of subprime mortgages, and took down the rest of the economy with it. We all remember the officious rules promulgated by the Justice Department to prevent banks from extending credit to those who could not pay it back. All taxpayers got from it was a great recession and over $137 billion in bailout money to spare these officious market-distorting entities.
Earlier this year, the new “Bureau of Consumer Financial Protection (CFPB), created by Dodd-Frank, parachuted in like a rescue ranger to set new standards for mortgages. But if banks really adhered to such commonsense guidelines, it would completely shut down Obama’s goal of universal homeownership. That’s why he is now pushing new programs to subsidize subprime loans, even as he “cracks down” on banks for making risky loans! This, from the Washington Post:
The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.
President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.
In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.
Wow – just wow. We have come full circle. We are now back in the ‘90s – as if the subprime mortgage crisis never existed.
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