Should the US Government subsidize homeownership even more?

[OneFootInTheGrave]

The answer is "obviously not".

[Berzerker]

hmm... the housing bubble induced by policy - cheap money to get people buying houses - is at the heart of the problem? I keep hearing from liberals the free market failed. Just another example of the left wing blaming the free market for the failures of policies they support. Sorry, carry on...

[Dinner]

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.

I'm positive she thinks she's smarter and she does have an MBA (from an Ivy league school she says) and all I keep thinking is the suits who tanked the global economy all said the same thing. Deregulate, return to the wild west of the 19th century, let the market regulate itself, and other such things. I know two people currently attending Ivy league schools to get MBAs, two weeks ago I went to Vegas with both of them and several of the people they're going to b-school with, yes they're smart people but I came off with the feel that they're all pretty much cookie cutter people with cookie cutter ideas they repeat from their cookie cutter professors because that's what the other cookie cutter bosses want to hear when they decide who to hire for the cookie cutter analyst's job in NYC.

B-School doesn't generate lots of independent thinkers and instead steeps people in group think and orthodoxy or at least that's my impression. It's also why when I help interview potential new hires at work I generally lean towards people with real science or engineering degrees and away from MBAs. MBAs are pretty much a dime a dozen and they all act and say the same things. The only thing you really get at an Ivy B-school instead of a lesser B-school is you get to network with richer people. That's the $100,000 per year difference. I'm just not impressed when I hear another MBA saying the same thing they've been saying for the last 20 years irregardless of the results.

Let's remember that these "smart" B-school grads are the very people who ran their companies into the ground. How smart was that?

[Elok]

irregardless

at your undisacceptance of respectitudehood for the English language.

[Dinner]

hmm... the housing bubble induced by policy - cheap money to get people buying houses - is at the heart of the problem? I keep hearing from liberals the free market failed. Just another example of the left wing blaming the free market for the failures of policies they support. Sorry, carry on...

NPR has been playing a really great indepth analysis of the origins of the financial crisis. The basic problem is that the global money supply kept growing and growing. Since 2001 it has doubled from $35 trillion (this is the long term holdings of things like central banks, retirement funds, etc...) to $70 trillion so you doubled the amount of money out there but you had just marginally more safe high quality assets where that money could be invested. That's why you had so much cheap money sloshing around the international financial system and that was the major macro reason why people could get $500,000 loans with no money down and no proof of income.

That's what fueled the housing bubble while unregulated things like credit default swaps and mortgage backed securities allowed risk to be spread all over the place even to people who thought they had no exposure. Another big problem was that the companies who were selling these CDS and MBS also owned the credit ratings agencies which gave even the stinkiest pile of dung a top investment rating. We do need regulations to remove these conflicts of interest so that the seller isn't rating the how risky the stuff their selling is. We need independent people to do that but deregulation let the wolf guard the sheep flock and that needs to stop. It also wouldn't hurt if the government demands standardization for these new financial toys so that buyers can actually get a clear picture of what it is they're being asked to buy. Greater transparency comes as a result of government mandated regulations not from deregulation.

[Victor Galis]

Not only no, but hell no.

I agree with DanS. That's new and different.

[Theben]

I certainly don't see any reason not to do so in limited cases. At least something will be saved for our tax dollars and we'll know where it went.

hmm... the housing bubble induced by policy - cheap money to get people buying houses - is at the heart of the problem? I keep hearing from liberals the free market failed. Just another example of the left wing blaming the free market for the failures of policies they support. Sorry, carry on...

Except it was the free market/corrupt lenders that decided these risky loans could be supported, not the lowered % rates or borrowers, who were often misled. But don't let that deter you from your ideological talking points...

[Berzerker]

I wont, thats a load of crap. The free market didn't create the govt policy of trying to get people into homes by throwing cheap money around inducing a housing bubble nor did it provide these incentives. Like we have a free market

[Victor Galis]

I wont, thats a load of crap. The free market didn't create the govt policy of trying to get people into homes by throwing cheap money around inducing a housing bubble nor did it provide these incentives. Like we have a free market

The government didn't require companies to pay their executives based on super short-term performance goals, nor did it force mortgage lenders to securitise bad loans and pass on the whole risk to others so that they could afford not to care who they were lending to. Can you accept that there's a lot of blame to go around and a lot of people, companies, and institutions that deserve some of it?

[Kuciwalker]

The government didn't require companies to pay their executives based on super short-term performance goals

Incorrect.

[Naked Gents Rut]

CONTRARY TO A VIEW POPULARIZED DURING THE 2008 presidential election season, the current economic crisis was not the result of deregulation.

The Bush administration made many mistakes, but deregulation was not one of them.

Not only was there no major deregulation passed during the past eight years, but the Bush administration and a Republican Congress approved the most sweeping financial-market regulation in decades.

The bipartisan Sarbanes-Oxley Act was enacted in 2002 to prevent corporate fraud and restore investor confidence after the collapse of Enron and WorldCom. It failed to prevent the accounting fraud and influence-peddling scandals at Fannie Mae and Freddie Mac. And even after those scandals were widely understood, regulators sent Fannie and Freddie back into the market to continue buying subprime loans, lending and borrowing with implied taxpayer backing.

Across the government, the Bush administration supported new regulations that added almost 1,000 pages a year to the Federal Register, nearly a record. If this is insufficient regulation, it's hard to imagine a scope that would be effective.

We are in this mess largely because critical thought and moral judgment have been subordinated to the politicization of our economy, resulting in regulatory gaps and excessive controls of the wrong kind. ...

Today's problems have their roots in programs and financial instruments that shifted the locus of moral responsibility away from private individuals and institutions to wider circles that were understood to end with a government guarantee. Heads of the top banks and financial institutions could approve substandard home-mortgage underwriting -- prone to increased default -- because those loans could be securitized by Wall Street and sold off to investors or to government-sponsored enterprises (GSEs), with no likely recourse to the financial institution of origin.

Our present crisis began in the 1970s, during the Carter administration, with passage of the Community Reinvestment Act to stem bank redlining and liberalize lending in order to extend home ownership in lower-income communities. Then in the 1990s, the Department of Housing and Urban Development took a fateful step by getting the GSEs to accept subprime mortgages. With Fannie and Freddie easing credit requirements on loans they would purchase from lenders, banks could greatly increase lending to borrowers unqualified for conventional loans. In the name of extending affordable housing, this broadened the acceptability of risky loans throughout the financial system.

http://online.barrons.com/article_email/SB123396551669058895-lMyQjAxMDI5MzAzNzkwNjc1Wj.html

[Darius871]

Lies!

[Unimatrix11]

... I keep hearing from liberals the free market failed...

From what i understand, a liberal would never say such a thing. You mean ´democrats´ in US-politcs-standard, right? In today´s politics there is hardly anything but liberals, no matter which country you look at.

(Uhem, yeah i notice the logical inconsistancy of the statement - will figure it out later, maybe)

[Dinner]

Sarbanes-Oxley Act had nothing to do with banking or finance but instead was designed to stop rampant fraud in corporate earnings statements after the Enron debacle. There were however, a number, of acts passed which greatly loosened regulations on banks and financial institutions.

[chequita guevara]

What happened was a perfect storm of government regulation, excess money, and greed. Without the government regulation, this would have happened anyway, and in fact, has happened before. One need only look at the South Florida property bubble of the 1920s for confirmation. But the regulations made it easier.

No, the real problem is there was too much money seeking investment and an unjustified belief that American property values never deflate. Even if the borrower defaulted on the loan, the lender assumed it would at least end up holding a piece of property worth the amount of the loan or more, and could thus recover its costs. They refused to believe that in many sectors, the housing market was over-valued, and so when the inevitable defaults started coming in, the banks would be left with a half empty bag. The real winners are those who sold just before the bubble burst, and so what basically happened was a transfer of wealth from greedy pigs to home sellers. Now the greedy pigs want the public to bail out their stupidity.