This is great: More loosening standards to solve the problem

Has the government learned its lesson? Apparently, they haven't:

The housing agency's director, James Lockhart, suggested Tuesday that mortgage finance companies Fannie Mae and Freddie Mac could loosen lending standards to help more homebuyers qualify for a loan and stabilize the market. The government took control of Fannie and Freddie earlier this month. . . .



Blogger Jim Lagnese said...

That's as bad as taking an advance on your credit card to pay the credit card payment. Einstein said something about this: what is doing the same thing repeatedly and expecting a different result? Insanity. John, it just keeps getting better...

10/04/2008 5:10 PM  
Blogger Harry Schell said...

BOHICA...more bad loans on the way.

"Attentiveness to the mission" precludes sound business practice and is what got Fannie/Freddie and the credit markets into trouble in the first place.

Obviously, nobody had learned anything out of this fiasco.

Pass the Tylenol...

10/04/2008 8:26 PM  
Anonymous Anonymous said...

John, what do you think of these two proposals from the Wall Street Journal op-ed department to keep U.S. house prices artificially high by providing cheap government mortgages:

The Problem Is Still Falling House Prices

The bailout bill doesn't get at the root of the credit crunch.


We need a firewall to break the downward spiral of house prices. Here's how it might work. The federal government would offer any homeowner with a mortgage an opportunity to replace 20% of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000.


First, Let's Stabilize Home Prices


We propose that the Bush administration and Congress allow all residential mortgages on primary residences to be refinanced into 30-year fixed-rate mortgages at 5.25% (matching the lowest mortgage rate in the past 30 years), and place those mortgages with Fannie Mae and Freddie Mac. Investors and speculators should not be allowed to qualify.

10/05/2008 12:02 PM  
Blogger John Lott said...

Thanks, Anonymous. I think that both ideas are stupid. The government has done enough damage and should just get out of this lending business. The government has no obvious expertise in making loans. In addition, politics will enter into any legislation that gets passed and it will be a mess.

10/05/2008 2:43 PM  
Anonymous Anonymous said...

John, another way the government interferes with the housing market is offering deductions on federal taxes for mortgage interest and property taxes. In addition, there is a $250K (or $500K for married couples) exemption of capital gains taxes for housing profits on a seller's primary residence.

In many U.S. households, the federal government ends up paying about 20% of the carrying costs. Talk about welfare.

If the federal government got out of the business of subsidizing housing, home much do you think the U.S. real estate market would shrink? Clearly Americans are over-housed today with the average new house size ballooning out of control to about 2,400 square feet. In 1970, the average new house size was only about 1,400 square feet.

10/05/2008 3:26 PM  

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