Government to keep "big role" in setting mortgage rates?
The Washington Post reports today that President Obama is asking for proposals on how the federal government can try to re-create the housing bubble. Or...at least that's what I got out of it.
Reportedly, President Obama wants to ensure the continuance of Washington's favorite taxpayer-subsidized arms of political patronage - Fannie Mae and Freddie Mac. He also wants to make sure the federal government stays in the mortgage insurance business, guaranteeing loans for risky borrowers - you know, like those of the subprime variety.
Members of Congress are almost assured to go along with any scheme to keep Fannie and Freddie alive, which really says a lot about the political class.
Einstein defined insanity as "doing the same thing over and over again and expecting different results." Truly, by Einstein's definition, Washington policymakers are completely insane.
I really can't put my frustration into words more eloquent than those of Cato's Mark Calabria:
Perhaps most offensive is that the Post reports that Obama "officials don't want to punish the thousands of Fannie and Freddie employees who have specialized knowledge about the mortgage market." Seriously? What about the many blameless employees of AIG, Lehman Brothers, or Bear Stearns? Or New Century for that matter. Did the janitors and receptionists at those firms really cause the crisis? The truth is that the employees of Fannie and Freddie have been lining their pockets at the expense of the taxpayer for years. What the Administration is really saying is that they wouldn't want all the political operatives at these favored firms to lose their perks. After all, Obama officials will need somewhere to land after 2012 and Goldman Sachs has only so many slots.
What's most depressing is that you can't say Obama hasn't been given the facts. As the Post makes clear, his economic advisers spelled out the case against massive subsidies for the mortgage market. Austan Goolsbee, chair of Obama's Council of Economic Advisers, points out: by subsidizing mortgage investments, the government drives capital away from other types of investments. If Obama truly wants to help the middle and working class, then he'd want capital to flow into investments that increase labor productivity, which is the ultimate source of wage growth. Running up asset prices, like houses, does not make us wealthier in the long run.
Indeed, sir.
