Friday, September 4, 2009

Housing Bailouts: Lessons not Learned

The housing boom and bust that occurred earlier in this decade resulted from efforts by Fannie Mae and Freddie Mac - the government sponsored enterprises with implict backing from taxpayers - to extend mortgage credit to high-risk borrowers. This lending did not impose appropriate conditions on borrower income and assets, and it included loans with minimal downpayments. We know how that turned out.

Did U.S. policymakers learn their lessons from this debacle and stop subsidizing mortgage lending to risky borrowers? NO. Instead, the Federal Housing Authority lept into the breach:


The FHA insures private lenders against defaults on certain home mortgages, an inducement to make such loans. Insurance from the New Deal-era agency has enabled lending to buyers who can't make a big down payment or who want to refinance but have little equity. Most private lenders have sharply curtailed credit to those borrowers.

In the past two years, the number of loans insured by the FHA has soared and its market share reached 23% in the second quarter, up from 2.7% in 2006, according to Inside Mortgage Finance. FHA-backed loans outstanding totaled $429 billion in fiscal 2008, a number projected to hit $627 billion this year.

And what is the result of this surge in FHA insurance?

The Federal Housing Administration, hit by increasing mortgage-related losses, is in danger of seeing its reserves fall below the level demanded by Congress, according to government officials, in a development that could raise concerns about whether the agency needs a taxpayer bailout.

This is madness. Repeat after me: TANSTAAFL (There ain't no such thing as a free lunch).

15 comments:

Gordon Hutton said...

Is it madness if you don't have to respond to the results? FHA, like Freddie and Fannie, will not be going out of business.

Madness is when this happens in the real world of business, but even there, whether it is an R or D administration, you can hold out hope for a bailout if you're in an appropriate business or the right firm.

If you can expand the money supply, the lunches are indeed free. Accountability is for chumps.

Steve M. said...

the free lunch fallacy is kind of like spot training... the belief that I can do sit ups to get fat off my abs... it is completely absurd, and yet it won't die...

Gordon Hutton said...

Man, I hope my sarcasm was recognizable.

Wilson said...

Here is a great chance to drive a large number of visitors to your blogs and websites for free.

Submit your websites, blogs, videos to http://www.zillionsb.com and get 1000s of targeted visitors everyday for free. It also helps your websites/blogs gain valuable backlinks.

Let the other bloggers cast their votes to push your posts up for a greater visibility. Enjoy a free, huge traffic to your sites.

Thanks

Sara
http://www.zillionsb.com

Anonymous said...

pvp bible -
quick article pro -
quit smoking today -
reg defense -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
reg tool -
relationship headquarters -
reverse mobile -
richard mackenzie direct -
rocket japanese -
rotator cuff training -
satellite tv pc master -
secrets book -
spy no more -
spyware cease -
survey scout -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the guru assassin -
the power pause -
tmj help -
tonsil stones remedies -
turbulence training -
two minute profits -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
web traffic machines -

Anonymous said...

wedding speech 4u -
wind plans -
xp repair pro -
your fun business -
zygor guides -
500 love making tips -
acid alkaline diet -
acne no more -
advanced defrag -
anti spyware bot -
art of approaching -
banish tinnitus -
beat eczema -
blood pressure normalized -
burnthefat -
burn the fat -
conversationalhypnosis -
conversational hypnosis -
cpa arbitrage -
creative date ideas -
debt free in three -
digital background -
dirty talking guide -
discus fish secrets -
duplicate file cleaner -
dw insider -
earth4energy -
earth 4 energy -
easy tv soft -
easy web video -
eatstopeat -
eat stop eat -
end your tinnitus -
error doctor -

Anonymous said...

evidence smart -
fap winner -
fat burning furnace -
fat loss 4 idiots -
final sync -
final uninstaller -
firewall gold -
fitness model program -
fit over 40 -
fit yummy yummy -
flatten your abs -
forex auto pilot -
gain opinion -
gold secrets -
government records -
governmentregistry -
government registry -
green diy energy -
healthy urban kitchen -
highest pay surveys -
holo think -
homemadeenergy -
home made energy -
i want a teaching job -
joyful tomato -
keyword elite -
learn photoshop videos -
lmt forex formula -
lower body make over -
macro virus -
malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -

Anonymous said...

microcap millionaires -
moles warts removal -
money siphon system -
muscle gaining secrets -
my list strategy -
my phone riches -
natural cancer treatments -
online tv pc -
panic away -
pdf creator -
peel away ads -
pips leader -
ppc web spy -
prevent sweating -
privacy control -
publicrecordspro -
public records pro -
questions for couples -
quick article pro -
quick paid surveys -
quit smoking today -
reg defense -
registry winner -
reg tool -
reverse mobile -
richard mackenzie direct -
rocket german -
rotator cuff training -
rss feeds submit -
satellite pc box -
save the marriage -
spy no more -
spyware stop -
super seduction power -

Anonymous said...

surefire trading challenge -
tattoo me now -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the dog food conspiracy -
the mini site formula -
tmj help -
tonsil stones remedies -
truth about abs -
twitter trick -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
win clear -
xbox 360 red light fix -
xp repair pro -
500 love making tips -
acid alkaline diet -
advanced defrag -
alpha male system -
amazing cover letters -
anti spyware -
anti spyware bot -
article rewriter -
art of approaching -
auto cash system -
burnthefat -
burn the fat -
bv cures -
calling men -
camera dollars -
carb rotation diet -

Anonymous said...

cash making power sites -
cb mall -
combat the fat -
conversationalhypnosis -
conversational hypnosis -
credit secrets bible -
destroy hemorrhoids -
dirty talking guide -
dotcom income secrets -
duplicate file cleaner -
dvd copy pro -
earth4energy -
earth 4 energy -
easy launcher -
easy system cleaner -
eatstopeat -
eat stop eat -
eczema free forever -
end your tinnitus -
error nuker -
fatburningfurnace -
fat burning furnace -
fat loss 4 idiots -
final sync -
firewall gold -
fitness model program -
fit over 40 -
fit yummy yummy -
flattenyourabs -
flatten your abs -
forex candlesticks made easy -
forex killer -
forex megadroid -
get rid of your cellulite -

Anonymous said...

g money pro -
google shadow -
governmentregistry -
government registry -
gov resources -
health biz in a box -
homemadeenergy -
home made energy -
hybrid water power -
i software tv -
joyful tomato -
keyword spy pro -
kingdom of pets -
macro virus -
malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
microcap millionaires -
moles warts removal -
mole wart removal -
muscle gaining secrets -
natural cure for yeast infection -
paid surveys etc -
panic away -
pdf creator -
public records pro -
quick article pro -
quick income blueprint -
quit smoking today -
ranking loophole -
reg clean -
reg defense -
regi cleanse -

Anonymous said...

registry easy -
registry genius -
registry winner -
reg sweep -
reg tool -
reverse mobile -
richard mackenzie direct -
rig worker -
rocket chinese -
rocket french -
rocket german -
rotator cuff training -
rss feeds submit -
save the marriage -
site builder elite -
six figure yearly 2009 -
sleep tracks -
sold in 21 days -
spyware stop -
stop being tired -
stop your hair loss -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
tonsil stones remedies -
top secret magic code -
truth about abs -
turbulence training -
turn your photos into cash -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
win clear -

Anonymous said...

xbox 360 red light fix -
xp repair pro -
1st promotion -
3 redlight fix -
500 love making tips -
acid alkaline diet -
advanced defrag -
anti spyware -
anti spyware bot -
art of approaching -
banish rosacea -
blog lock down -
brad yates -
building a chicken coop -
burnthefat -
burn the fat -
carb rotation diet -
combat the fat -
conversationalhypnosis -
conversational hypnosis -
copy n profit -
credit secrets bible -
cure angular cheilitis -
cure morning sickness -
dirty talking guide -
domain tweak system -
dotcom income secrets -
duplicate file cleaner -
earth4energy -
earth 4 energy -
easy launcher -
easy system cleaner -
eatstopeat -
eat stop eat -

Anonymous said...

eczema free forever -
email finder -
energy 2 green -
error nuker -
evidence smart -
fat burning furnace -
fat loss 4 idiots -
final sync -
fitness model program -
fit yummy yummy -
flattenyourabs -
forex enterprise -
governmentregistry -
government registry -
home job stop -
homemadeenergy -
home made energy -
how do i get him back -
hyper vre -
keyword spy pro -
kingdom of pets -
mafia war secrets -
malware bot -
master cleanse secrets -
maternityacupressure -
maternity acupressure -
maximum paid surveys -
meet your sweet -
mobile tv pro -
musclegainingsecrets -
muscle gaining secrets -
my dish biz -
one minute cure -
paid surveys online -

stop pre ejaculation said...

Thanks a lot for this time sharing about HOUSING BAILOUTS: LESSONS NOT LEARNED. This is really a nice reading to be sharing.