Should the US Government subsidize homeownership even more?

[Dinner]

This is a high risk, high reward option being pushed by Senate Republicans which would reward big mortgage underwriters. The idea is fairly simple. The government can borrow money at about 3.5% APR by selling T-bills and then reloan that money via fannie and freddie so that people can refinance their mortgages at a 30 year fixed set at 4% APR. Potentially this could save homeowners hundreds of dollars each month by lowering their interest rates and the financial institutions who are taking a big hit for writing risky homeloans would be able to get off the hook as the government essentially buys them out (the old loans get repaid with money from the new lower interest government backed loans).

The problems are numerous. What happens if housing prices continue to fall as virtually every economist believes they will? What do you do about the 25%-30% of US homeowners who are already upside down on their home loans? Do you loan them more then the houses are worth just so they can pay off banks who made risky bets? If prices keep falling then will more people default only now they'll default on the government instead of on private banks? This potentially could be very good or very bad so would you put your tax dollars on this bet?

http://www.npr.org/templates/story/story.php?storyId=100259536

[The Mad Monk]

I don't like it. I think the housing market should be allowed to hit bottom, then find its own level.

[Kuciwalker]

The answer is "obviously not".

[Saras]

If I were an unmarried lad, I'd seek this girl out and make her fall in love with me, and then marry her and make her happy:

http://equityprivate.typepad.com/ep/2009/02/dare-ye-inquire-concerning-such-a-wretch.html

[Dinner]

I only read the one article and she reminds me of the generic product of the B-school in a generic suit regurgitating generic lines (abet with nice prose). Seriously, she contends we need more deregulation? 100% wrong, deregulation got us where we are today. What we need is a return to solid FDR style "I'm going to tell you exactly what you bankers can and cannot do and if you don't like it then tough". Regulate, regulate, regulate because ANYTHING is better then the deregulation nightmare we're having/had.

[Velociryx]

I'm on the fence here. It certainly has advantages in that it (finally!) does something to help out regular folks, rather than spoon feeding hordes of cash to the very people who ran their institutions aground. On the other hand, as you say, the problems are numerous, and before something like this would even be seriously contemplated, those problems would have to be carefully thought out (ie - one possible solution to allowing the market to find its own bottom would be only applying this rule to existing mortgages, and allowing new ones to be drafted out according to some new, but more regulated system). This too, has its (obvious) problems, but at least would throw a bone to those "regular folks" who have stood by and watched billions of dollars in bonuses paid out with their money, for essentially, nothing.

IF we're going to continue to pour money into these insolvent institutions (and it certainly appears that we are) then at least some consideration should be paid to the little guy.

Whether that takes the form of something like this, or something else entirely, I dunno. But the fat cats getting the million dollar bonuses aren't hurting because of the recession...that dubious honor goes to the man on the street.

-=Vel=-

[Velociryx]

Or we could take a page from the playbook of ancient Athens and do what Solon did...

-=Vel=-

EDIT/Disclaimer: I am currently taking a course on Ancient Greece, and did not know this off the top of my head , but below is the relevant excerpt:

Solon immediately dismissed all outstanding debts, and he freed as many Athenians as he could from the slavery they had sold themselves into. He banned any loans that are secured by a promise to enter into slavery if the loan is defaulted, and he tried to bring people who had been sold into slavery abroad back to Athens. In addition, he encouraged the development of olive and wine production, so that by the end of the century, most of Athenian land was dedicated to these lucrative crops.

[Arrian]

No, no it shouldn't.

-Arrian

[Velociryx]

NM...LOL...I was asking Arrian a question, but I figured it out.

-=Vel=-

[DanS]

Not only no, but hell no.

[Dinner]

It is amazing that just a couple of months ago Republicans were trying to blame programs like this (instead of deregulation) for the financial crisis but here they are proposing exactly what they claimed was wrong. Either they were lying then or they think we're all to stupid to remember two months back.

[C0ckney]

as the article linked to in the OP alludes to, the biggest problem facing the US housing market is surely the number of foreclosures.

[Saras]

I only read the one article and she reminds me of the generic product of the B-school in a generic suit regurgitating generic lines (abet with nice prose). Seriously, she contends we need more deregulation? 100% wrong, deregulation got us where we are today. What we need is a return to solid FDR style "I'm going to tell you exactly what you bankers can and cannot do and if you don't like it then tough". Regulate, regulate, regulate because ANYTHING is better then the deregulation nightmare we're having/had.

You're an ok guy, but she's way smarter than you. And if you can't see beyond her (to me somewhat pretentious) prose, your loss.

[Unimatrix11]

[...] option being pushed by Senate Republicans [...]
[...] What happens if housing prices continue to fall as virtually every economist believes they will? [...]

1+1 for you. Reason: Again, either stupity or corrupt intention.

[-Jrabbit]

Either they were lying then or they think we're all to stupid to remember two months back.

Reason: Again, either stupity or corrupt intention.

Based on these recent responses, combined with the statements by many, in dozens of other threads here, I am forced to conclude that the terms "Republican" and "Ben Kenobi" can be used interchangeably.