Congratulations, the government is now going to officially subsidize bad behavior! I thought the 'nanny state' was at least supposed to be a good nanny!
According to Larry Kudlow at National Review Online, President Obama's mortgage bailout program is exactly what we don't need. The program only effects Fannie Mae and Freddie Mac. Only their products are eligible for mortgage relief. Jumbo mortgages and private-label mortgages created by various non-bank lenders are not eligible for relief. Fannnie Mae and Freddie Mac already run 48 percent of the mortgage market. Obama's proposal would greatly enlarge that and move the mortgage system toward government nationalization.
The program will allow the courts to renegotiate interest rates and loan principal. This would overturn private contracts and throw out the rule of law. Do we think future investors will put up mortgage capital if they fear judges will overturn the terms of contracts? Home-loan supplies will fall and mortgage rates will rise.
The free market is already helping to take care of the mortgage crisis--the unsold-inventory index for existing single-family detached homes in December 2008 was 5.6 months, compared with 13.4 months for the year-ago period. And the median number of days it took to sell a single-family home dropped to 46.1 in December 2008, compared with 66.7 in December 2007. So inventories are dropping, the number of days to sell a home are falling, and sales are rising in the wake of lower prices.
According to the article:
"President Obama's massive mortgage-bailout plan is nothing more than a thinly disguised entitlement program that redistributes income from the responsible 92 percent of home-owning mortgage holders who pay their bills on time to the irresponsible defaulters who bought more than they could ever afford. This is Obama's spread-the-wealth program in action.
Team Obama is rewarding bad behavior. It is enlarging moral hazard. It is expanding its welfarist approach to economic policy. And with a huge expansion of government-owned zombie lenders Fannie Mae and Freddie Mac, Team Obama is taking a giant step toward nationalizing the mortgage market."
This program does not move in a direction that is good for our country.
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