Before It’s News
March 31, 2010
The latest housing initiative announced today by the Obama Administration draws the U.S. government and, by proxy, all taxpaying Americans, further into the inescapable quagmire of a devastated real estate market.
By transferring more underwater mortgage balances onto the public books, the plan puts taxpayers on the hook for further losses if housing prices continue to fall. Given the massive support for real estate already afforded by record-low interest rates and massive federal tax and policy incentives, there are very good reasons to believe that home prices will indeed collapse when these crutches are removed. Recent spikes in long-term interest rates warn of this prospect.
If the Administration had allowed losses to fall where they rightfully belong, namely on those who foolishly loaded up on toxic mortgage bonds, then the housing market would have already found its true clearing level. Instead, every measure is working to prolong and delay the ultimate reckoning, while setting up taxpayers as the patsy. Given the horrendous government deficit projections for the next several years, any losses incurred by thegovernment mortgage portfolio may add a critical stress on America’s fiscal viability.
This article was posted: Wednesday, March 31, 2010 at 4:43 am