Saturday, January 26, 2008

GOP Protects Predatory Lending Industry

Stimulant or Hallucinogen
Reason Online, Jan 25, 2008
[B]anks had basically stopped writing jumbo loans in some markets because they have no idea what the actual value of real estate might be at the moment. This is a rational response to market uncertainty and can only speed along the necessary real estate correction along with encouraging banks to take losses on their books and move forward.

Sticking government-backed enterprises in the middle of this process removes market discipline from the mix. Even the federal regulator charged with oversight of Fannie and Freddie says bumping the conforming loan limit to $700K (!) is a bad idea. But one look at Nancy Pelosi's rictus grin and it is clear Uncle Sam will permanently support California's real estate bubble.

To recap, in a matter of months we've gotten the Federal Housing Administration to guarantee up to 100 percent of loans up to $367,000, a federal fiat that adjustable rate mortgages will no longer adjust, and now federal GSE guarantees for mortgages of almost three-quarters of a million dollars. No wonder the mighty brain of Bill Kristol looks at the process and calls it a "win-win." We've nationalized the mortgage industry, surely a great thing of National Greatness.

It's funny how conservatives want to reduce or eliminate government's role in regulating worker safety, health care, water purity, education, and retirement security but fervently endorse government's underwriting of the predatory lending industry. To paraphrase Tennessee Williams' Big Daddy, "There a powerful and obnoxious odor of hypocrisy in this room."


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