Ed Morrissey says that we shouldn’t worry about McCain’s Big Brother Mortgage Holding Company. After all, it already passed Congress and it’s nothing new, so why fret about it?
Well, how about I take a shot at answering that? I’ll start with a quote from his post.
First, lenders already have begun modifiying mortgages, including principal, and for very good reason. Foreclosures create massive losses for lenders, and they’re better off keeping owners in their homes and making payments — even if they take a 10-20% loss on the principal, on paper. The result will be lower profit than originally expected, but it’s still profit, and right now that looks a lot better than a potential 50-75% loss through foreclosure.
Now that Treasury will buy hundreds of billions in mortgage-backed securities, they in effect have become the lender. They will own the papers on these homes, and must act in the long-term best interest in managing them. That will mean negotiating with homeowners just as private lenders have already done, trying to keep people in their homes and preventing as many defaults as possible.
So what? Ed glides over the true point of contention altogether. No one’s saying that lenders aren’t modifying mortgages. What critics, including me, are saying is that it is wrong for the federal government to become the landlord to hundreds of thousands, and perhaps millions, of Americans. That is socialism – full freaking stop.
I don’t care who made the suggestion nor how many bills passed Congress. It is not a good thing for the federal government to be in the business of holding paper on American homeowners, nor is it good for the government to attempt to make a profit on this deal. Making the government the landlord of the people and expecting it to recoup an “investment” puts it in direct competition with the citizens over which the it has direct power. The government should never be in the position where it must compete agaisnt the best interests of the people it serves. Never.
It boggles my mind that anyone who is remotely conservative could suggest that this program is a good idea.
Renegotiating the principal on these loans will not directly impact home values, for two reasons. The action will keep these homes off the market, while home values depend on the sale prices of homes in the immediate vicinity. Second, home values are already dropping, thanks to the deflation of the housing bubble, excess inventory through overbuilding of new homes, and the anticipated addition of tens of thousands of foreclosures.
That is simply untrue. Renegotiating the principal on those loans will actually drive home prices upwards to a level chosen by the government. Instead of letting the housing market stabilize at the level the market can bear by allowing the houses to reach the level people are willing to pay for them, the government is going to decide what value is “fair” or “right” or whatever other nonsense word John McCain will plug in to make th is all palatable to otherwise sensible conservatives.
For those of you who don’t think this will artificially raise home prices fare above their real value, just look at a couple other areas where the Federal government has jumped in with substantial subsidies. Do you think the cost of health care is too high? How about the legendary Pentagon toilet seats and screwdrivers? Are college tuitions affordable for the average person without government help?
In each of these cases, the prices of the commodities involves are higher because the government either pushed the prices higher on purpose or because the government subsidy reset the price “floor”. Do you believe, for instance, that college tuitions would remain the same if the Pell Grant and Stafford Loan programs went away or is it more likely that tuitions would adjust to account for the lack of “guaranteed money” on which the college has always been able to rely? What would be the cost of an F-16 fighter jet if the Department of Defense had to pay the same prices that every other manufacturer had to pay instead of jacked-up contractor rates?
One of the underlying problems behind the mortgage crisis is that the federal government drove housing prices to a level too high for the market to sustain thanks to its predatory lending practices through Fannie Mae and Freddie Mac. The solution is not to have the government get involved again to keep those prices artificially high into perpetuity. The market needs to find its own stable point. That is the only thing that will keep the housing market healthy. Government intervention got us into this mess. More government intervention is not the answer. I would expect my fellow conservatives to remember that.
Tags: Conservatives, Ed Morrissey, Fannie Mae, Freddie Mac, John McCain, Socialism
