Obama About to Create a New Housing Bubble

The housing bubble of 2008 is still fresh in our memories. Drive around some of America’s large cities and you’ll see cut-in subdivisions with no houses. The roads are there, the underground utilizes have been laid, and the lots are covered with weeds.

Millions of Americans have homes that are worth less than what they owe. Millions of homeowners walked away from homes they could not afford.

The housing bubble and later collapse was caused by government interference in the marketplace. Bad loans were made to people who had no business getting loans. With millions of people able to get loans for houses that under normal circumstances they could not afford, a housing bubble was created. Home prices became artificially high.

One would think that the politicians who developed this insanity would not do it again.

The definition of insanity is straightforward and simple to understand. You have to be insane not to understand it: “Insanity is doing the same thing over and over again and expecting different results” (Albert Einstein).

A person who continues to loan money to someone who cannot pay it back is insane. An insane person is someone who would continue to take his automobile to the same mechanic even after the mechanic never fixes his car.

It’s hard to spot an insane politician because he can cover his bad economic decisions by stealing other people’s money to pay for his policy mistakes.

Well, the insanity is about to return. Obama and Company are pushing “to make more home loans available to people with weaker credit.” The recovery (if there is one) is said to be weak. By loaning money to people who don’t have money to spend on a new home it “will help power the economic recovery.” Saner voices note that the new policy “could open the door to the risky lending that caused the housing crash in the first place.”

Does Obama care? Of course not.

“President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.
“In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Did you notice that the loans are “taxpayer-backed loans”? I have not agreed to loan my money to people who don’t have the financial ability or collateral to justify such a loan. I’m not insane.

The credit crisis and housing bubble were not the fault of capitalism but with anti-capitalism brought on by government intervention. Congress created an economic fiction by subsidizing loans that no bank or mortgage company would have made if there had not been government (taxpayer)-backed financial institutions behind them insuring the bad loans they were making.

The mortgage debacle in America came about because of promised government loan guarantees insured by the VA, FHA, Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae).

It was the promise of the guarantee that made lending to high risk borrowers attractive to banks and other lenders. There was no perceived risk. The transactions seemingly only had an upside for the lending institutions. If people defaulted, no problem, stolen taxpayer dollars would insure the loans.

Lending institutions were also forced by Congress to make loans to minorities because they were minorities even if they could not afford the houses they wanted to purchase. In the end, millions of minority families lost their homes and any equity they had built up because they were offered loans that under normal financial circumstances they could not afford. But because the taxpayer-backed loans were available, the banks loaned them the money. If they didn’t, Jesse Jackson, Al Sharpton, and other race hustlers would have accused them of discrimination.

It remains to be seen if the people who elected these insane people will reveal themselves to be just as insane by applying for the taxpayer-backed loans.