Economics

Your Civil Right to a Government-Backed, Fixed Rate Mortgage

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The Wall Street Journal's Nick Timiraos looks at how Fannie Mae and Freddie Mac "offered a convenient off-budget means of subsidizing housing that continues today," and asks the (not-so) tough question: "Should the government continue to promote long-term, fixed-rate loans?" I could answer that question with one word—nope!—but the article's answer is worth reading too:

Feed me, Seymour!

Higher employment volatility and divorce rates have contributed to a "rate of homeownership that is more volatile," and less compatible with long-term mortgages, says Raj Date, executive director of the Cambridge Winter Center for Financial Institutions Policy, a think tank that researches financial-institution policy. Moving to a fully private market would raise housing costs, he says, but it would better protect taxpayers. [emphasis added]

But that approach would likely be unpopular. Americans have come to regard fixed-rate loans "as part of their civil rights," says Susan Woodward, a former chief economist for the Department of Housing and Urban Development and the Securities and Exchange Commission.

Is it true that Americans believe in the inalienable right to a cheap, impossible-to-foreclose-on mortgage? Maybe, maybe not; I can't say I've seen any polling data on the subject. But even if Pew found that 94 percent of voters wanted it added to the Bill of Rights, that wouldn't constitute a good reason to give it to them. Shouldn't sensible policy aim to dissuade citizens from free-lunch-focused economic fantasies?

The article goes on to discuss a forthcoming proposal by former Bush administration officials to privatize Fannie and Freddie and then allow both to purchase explicit government backing. That sounds better than the current setup, which might as well be an explicit plan to feed tens of billions of taxpayer dollars to the Sarlacc pit monster. But their idea is predicated on the assumption that government backstopping of the mortgage market is inevitable and unavoidable. It shouldn't be. And if it is, part of the reason is that current and former administration officials treat it as such.

Here's the Reason Foundation's Anthony Randazzo on why the government ought to get out of the mortgage game entirely.

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  1. Economic fanatasies!!?? Jesus Christ Suderman, your own Libertopia is right up there with thw withring away of the state. You’ve got some fucking balls to even raise the issue of economic fantasies, you market fundamentalist fuck!

    1. Oh, you’re just adorable.

    2. Leftist thinking and argument at its best.

    3. Sure I have a friend named Max. He makes me watch movies with naked people in them. He gives me juice boxes that taste funny. He’s silly; he’s a tickle monster. He makes me taste things and puts things in my heine.

    4. Max’s idiocy never ceases to amaze me. His economic ignorance is staggering.

    5. I know it’s early, but, man, I could really go for a taco!

      1. And, oh, I’m not the sharpest spade in the shed, but that Max guy makes me look like Stephan Hawking.

    6. Max,

      The problem is that in any other context you’d assert that libertarians KNOW their policies will hurt [da poor / da minoritiez / da womenz / da Earf] but that we just don’t care.

      So which is it? Are we heartless assholes who don’t care what happens, or delusional Utopians who think our platform will get everyone a pony?

      It can’t be both. Pick one.

      1. He still has to solve the “libertarians are a completely ignored super-minority” and “teh libertarians are dangerous!” conundrum.

      2. If you notice Max never responds to the responses to him. I am beginning to suspect he is performance art. Probably brought to us by whoever brings us Juanita.

        1. And you’d think Max would respond. Summer break from 9th grade has given him so much free time.

    7. nice mouth. meybe someone would listen to your point if you spoke with some class

  2. But it is fools gold. When the government subsidizes something, it just makes it more expensive. The consumers don’t benefit the owners and producers benefit. Yeah, we all get artificially cheap loans. But we have to pay more for our homes. That is the problem with third way socialism where you let the market produce supply but subsidize demand to make things more equitable, you just end up with artificially high prices.

    There are certainly people who benefit from this. Real estate agents benefit. Time was that unless you were selling really huge homes, real estate agents didn’t make much money. Now it is incredibly lucrative. State and local governments benefit by being able to raise property tax assessment. And of course boomers and old people benefited by seeing the price of their homes rise artificially. But everyone else, including many of the people the subsidy was supposed to help got fucked. And now thanks to this we live in a country where people have to pay an inordinately large percentage of their incomes for housing.

    1. The homebuyers of today just have to trust that when it comes time for them to sell the home, the government will be just as generous to them.

      Trust and obey…
      Trust and obey…

      1. Yes because housing prices can rise above the rate of inflation and income growth forever. Every home can be a million dollars. And you can afford it by using all that equity you built up in your last home. Housing prices will never go down. There is no limit to how high the prices can go. What could go wrong?

  3. Again Max, slow down. Spelling is important. But once again, you’ve missed the point. If Americans are encouraged to buy homes they cannot afford through government policies, regardless of how well-intentioned, when they can’t pay for them, other Americans will have to. Accordingly, a rational market, free from government interference, works better because it prevents people from buying homes they cannot afford. Presumably, they will then buy homes they can afford. Because frankly Max, I already have a home I can afford, and I don’t want to be forced to afford yours too.

    1. And of course honest people pay for the irresponsibility of others. If I go into the housing market and make bids that I can afford, I will get outbid by every jackass with similar income who is willing to take on an irresponsible debt. So my reward for being responsible is getting a worse house that I could have had had the government not enable jackasses to take out loans they can’t afford.

      1. Quite so John. But I fear that this is not really about real estate markets, but voter markets. Which is why we need to get government out of it. Last I heard, politicians were involved with the government.

      2. Ive been reading Stop Acting Rich (by the author of the millionaire next door). Not as good as MND, but has some interesting stats related to this. The single biggest factor that correlates with a person’s consumption level is the neighborhood they live in. People tend to spend at the same level as their neighbors. This is more important than income. Thus, when someone buys a home that they can marginal afford, they are going to buy the same cars as their neighbors and drink the same wines and etc, etc. And if the neighbors can afford that level, guess what? The person on the margin is going to spend themselves into a deep hole.

        Wealthy people who live in 150k homes, spend like people who live in 150k homes. House poor people in 400k homes, spend like people who live in 400k homes.

        1. “Wealthy people who live in 150k homes, spend like people who live in 150k homes”

          So true.

          1. It also explains why they are wealthy.

        2. This is true, I’m an MND and you’d never guess it by our house or our neighborhood. Furthermore, we shop at Walmart/Sam’s, we recently bought used Chevys (albeit, newer ones: 2008 and 2009) after owning our last cars for 12+ years, my kids brown bag it for lunch every day (even though they complain that other kids get hot lunch “every single day”) as do my wife and I, and we regularly go garage-saling. We know so many families who make more than us that are up to their eyeballs in debt with little or no savings (they tell us this via complaints about their marriage, kids, etc.). They all live in the richer part of town with bigger houses, nicer yards and they drive expensive foreign cars/SUVs.

        3. What happens to those who live in 400k homes not because they want to appear as though they have money but live in an area like San Francisco where there is absolutely no other option?

          Now THERE’S a perfect example of what happens when policy trumps sensibility.

    2. Sputter! Whine! Snivel!

      1. What a bizarre sounding orgasm.

        1. While watching C-SPAN, no less.

  4. /facepalm

  5. But their idea is predicated on the assumption that government backstopping of the mortgage market is inevitable and unavoidable.

    Well, of course. It would never occur to these imbeciles that there might be legitimate limits to what the government can or should do.

  6. it prevents people from buying homes they cannot afford.

    But- but- what about the great room? And the Cathedral Ceilings?

    And the three car garage? The Homeowners Association won’t let me park the boat in the driveway, in plain view!

  7. But even if Pew found that 94 percent of voters wanted it added to the Bill of Rights, that wouldn’t constitute a good reason to give it to them.

    That’s not the point. The point is that it would be politically infeasible to deprive them of it.

  8. — Boba Fett? Where?

    *clunk* Waaaaaaaaaaaaaaaaaahhhhhhhhhhh!

    — BBBUUUUURRRRPPPPP

    1. On Tatooine, pussy eats you.

      1. Yakoff the Hutt?

        1. +1000!

  9. I really don’t have any interest in subjecting my personal choices about home purchases or anything else to some government agency to see whether my choices are good or bad for society generally…

    This is starting to remind me of some of arguments around the Bush Administration’s poor decisions surrounding interrogation methods or wiretapping, where the President decided to do something stupid, and then the chattering classes all came up with novel reasons for him to have made his foolish choices…

    The problem with the bailouts wasn’t that people were too free to make choices that were or weren’t in the best interests of society generally–the bailouts were simply politicians, especially Obama and Bush, using fear to enable the squandering of our future earnings to bail out Wall Street investors…

    …and no amount of regulation can protect us from politicians and presidents who want to squander our future earnings like that. No amount of regulation will get rid of the business cycle either–this will all happen again.

    The good news is that a lot of this regulation will evaporate when the economic cycle starts climbing the ladder again; the bad news is that this sort of regulation makes it harder for the economic cycle to climb as high or to climb as quickly.

    We like to think our experts in government know more about these things that we do–but they’re just trying to justify the mistakes THEY MADE with this regulation. Please stop us from ever bailing out Wall Street investors with working people’s future earnings ever again–we can’t be trusted! That’s basically what they’re saying.

    And anyone who thinks regulation like this will stop this sort of thing from happening again in the future doesn’t know anything about economic history or the economic cycle.

    1. And anyone who thinks regulation like this will stop this sort of thing from happening again in the future doesn’t know anything about economic history or the economic cycle.

      We only need one financial regulation.

      Thou shalt not steal .

      Funny that the ancient Jews figured this out long before we did.

  10. The article goes on to discuss a forthcoming proposal by former Bush administration officials to privatize Fannie and Freddie and then allow both to purchase explicit government backing. That sounds better than the current setup

    No it doesn’t, it’s one step removed from the current setup and will revert any time. The big banks and financial firms don’t seem to have any trouble being a sarlacc pit, and they aren’t government agencies.

    1. It’s better in the sense of “being more honest.” Sort of like “all those farm subsidies with the data available” was better than the new, improved, “all the farm subsidies but hiding the data.”

  11. I’m confused about the picture. Why are those guys flying over Nancy’s vagina in that retarded looking boat?

    1. Gotta feel sorry for the man in THAT boat.

      1. I think the smell is keeping it afloat.

    2. We’re gonna need a bigger boat.

      1. I have a hilarious vision of Roy Schneider trying to shoot an oxygen tank hanging out of Nancy’s monstrous poon.

  12. I’m not sure he’s correct that “Moving to a fully private market would raise housing costs,…”.

    It would certainly result in higher mortgage interest rates. While technically that would mean higher monthly payments, loan pricipals would be lower due to lower house prices and higher down payments.

    Naturally the following groups would hate it 1) real estate agents, 2) home builders and 3) existing owners of houses, especially those purchased more that 5-8 years ago.

    Of course, a “fully private market” implies a drastic change in zoning rules and other regulations since demand driven by low interest rates is not the only factor driving higher housing prices. Again, not bloody likely, see preceding paragraph and add 4) the politicians who pander to groups 1 through 3.

    Oh dear, living within one’s means, what an archaic notion.

    1. You fucking caveman.

      (can you loan me a few clamshells?)

  13. I have a question for you, gentlemen and ladies.

    I have heard there is one among you who scribbles pictures of the Prophet Mohamed on his juice boxes and blasphemes Allah to the other children in his first grade class. I have also heard that his name is Max, is this true?

    1. Yes, it is true. We appeal to Allah for his mercy. BTW, Max lives here.

  14. We are so fucking fucked.

  15. “Shouldn’t sensible policy aim to dissuade citizens from free-lunch-focused economic fantasies?”

    Apparently not.

    1. “Sensible” clearly being a subjective term. :-/

  16. Why/how is it that the real estate salesmen have come through this housapocalypse episode completely unscathed?

    Every time I see one of those “It’s never been a better time to buy!” ads, I want to go punch a realtor in the adam’s apple.

    1. I always want to shove those big posts that have “for sale” signs right up the realitors southern waste disposal opening (either cosy (i.e., tight) or expansive (used more than a 2$ whore)) – but you are much, much nicer than me.

  17. Much as the 1964 civil Rights Act is settled law, Fannie Mae (1938) and Freddie Mac (1970)are settled instittutions promoting minority home ownership. You paleotarians need to get off this racism kick. Might I suggest diversity training?

  18. Is it true that Americans believe in the inalienable right to a cheap, impossible-to-foreclose-on mortgage?

    Given the intellectual atrophy that our “education” system has been demonstrating, I think it’s quite possible-seriously-that many people believe this is a “right”. The statists have done their best to get people to see anything they want as a “right”.

    1. ..and everything they Don’t want. See:
      My right not to be offended.
      Also, my right to feel safe.

    2. Given the intellectual atrophy that our ‘education’ system has been demonstrating…

      There, I think, you have hit upon the raw core of sooo many of today’s current political and economic problems…

  19. I am SO going to do an “I told you so” dance after civilization collapses form the weight of so many dead free ponies.

    Right before the rape and pillage gangs sweep my neighborhood.

  20. Free mortgages, calorie free extra delicious ice cream, 2 ponies for every child, and free pony care are the hallmark of a caring, compassionate gubermint, and we don’t want to be the only western country that doesn’t provide these goodies….er, necessities – NECESSITIES I tells ya!

    1. Not to mention, opposition to any of these….necessities (yeah let’s call them that, ummm…sad nerdy losers also NEED sex with hot women. There’s got to be a way to force hot women to fuck losers {hint it rhymes with “shuns”}) means that you are a racist. So what is it everyone? Do you support the progressive doctrine 100% or are you a JE…Racist. Yes, that’s the word. Racist.

  21. I don’t understand the venom directed specifically at fixed rate loans. The argument can’t be that it is OK to subsidize ARMs but not fixed rate loans.

    1. The elided over argument here is that a free market probably wouldn’t have a lot of long-term fixed rate loans these days.

      1. I dont see why not.

        The rates would be much higher than today, but fixed rate seems to be the more historical methodology. I think the 30 year might lose out to the 15/20 year, but with people buying less house (due to falling prices and higher downpayment requirements), 15 year payments would be much easier to make.

      2. I agree with Rob. It is just a pricing issue. There is no reason why the predominate loan wouldn’t be Fixed rate. It insures both sides a fixed return. You would just have to price it by both sides’ assessment of future interest rates.

  22. With respect to Max and a few others and their ilk – I have never, never read a single, principled, coherent or convincing argument against the principles on which libertarianism is based. Not a single one. It is always an ad hom (either explicit or veiled) or a strawman or some sort of a utilitarian or what if type of argument (never mind that any “what if” applies even more pointed every other approach to society.)

  23. The Busg administration created the problem, supported it, and was after ruining the world economy come what may.
    How about asking yourselves as to why none of you ever said: Hey, we ruined the economy of people that had nothing to do with us. Their financial discipline, hard work, sacrifice, we obliterated and plunged into deficit and recession.
    Will I ever hear an acknowledgment?
    No way! And yet you bitch and whine?

    1. Krassimir you must be under the impression that libertarians are Busg supporters.

  24. It was all that Busg deregulation that cause our problems, right, Krassimir?

  25. It’s funny, because the right to home and a job aren’t that far off it seems. It’ll probably go something like this: Fannie and Freddie will continue to back loans until one day in the not-too-distant future they say they can’t keep up. And at that point, the government will come to the rescue and forgive all of that debt, pushing FDR’s 2nd Bill of Rights. “We all deserve the right to a home and a job,” they’ll say.

    Is it that crazy a thought!? They’re already saying we all deserve healthcare, and that’s not true. Then think about the fact that we have a progressive income tax — a main plank of the communist manifesto — and we have a central bank — the main plank of the communist manifesto. Vladimir Lenin famously said, “The establishment of a central bank is 90% of communizing a nation.” Is the right to a home and a job that far off?

    Check out this article I found that goes plank by plank to show you just how very close to communism our country really is:

    http://www.truthoffering.com/p…..art-1.html

  26. If we enter a phase of inflation, we will have high interest and the issue of fixed rate mortgages will be irrelevent as most people with a 20 year morgage will WANT a flexable rate mortgage. I’m also concerned that fear will regulate an end to sub-prime mortgages when we get to 25% interest and 20% or 15% or 10% sub prime mortgages will make sence for stable home owners.

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