“I don’t see anything being gained by holding housing prices higher than the market rate,” says Dean Baker, economist and co-director of the liberal Center for Economic & Policy Research in Washington. “It is difficult to see why the government would want to pursue policies that would encourage people to pay too much for homes.“
The article this quote comes from is Businessweek which is surprising, really. Reading this in one of those “MSM” publications that co-sponsor lies directly fed from the <ahem> Fed., Inc. (“you’re real governing body”) who substitute artfully penned opinion for fact, and slant figures to support their conclusions.
He is truly the “Deaner,” having identified and wrote often about the trouble with our bubble.
A few of us noticed.
I suggest reading the rest of the article as well, because if you like your dope straight, it is rare that you’ll find it in an officially sanctioned news source:
America’s housing market implosion was the epicenter of the Great Recession. It’s hardly surprising that the federal government directed enormous resources at the market. Besides bailing out vulnerable banks, the federal government nationalized mortgage behemoths Fannie Mae and Freddie Mac, opened the lending spigot at the Federal Housing Administration (FHA), passed a first-time home buyers’ tax credit, and established a mortgage modification program for troubled homeowners. The Federal Reserve embarked on a $1.25 trillion purchase of mortgage-backed securities in an effort to engineer lower mortgage rates.
The Herculean efforts may be understandable. But they were a mistake in the early months of the downturn—and now stand as a public policy blunder in the early months of a recovery. That’s a harsh judgment, but it’s way past the time for ending taxpayer support of the housing market.
These policies are geared toward propping up home prices, the definition of a perverse public policy. Artificially holding prices at above-market levels harms new potential buyers, from young adults starting their own households to immigrants putting down stakes in the American Dream. The subsidies wrongly delay the inevitable home market price adjustment to excess supply in many markets across the country.
[ Businessweek ]
So yeah, if you start out from a disadvantage in life in this great nation, not only do you have to work triply harder than someone who started life, say, on third base, but you have the added struggle of public policy stacking the deck against you.
Many people will work hard to overcome their backgrounds and find a way to live the American dream (not home ownership, btw, but justice and equality under the rule of law) in spite of this.
It’s just that fewer and fewer will realize that dream.
“All this talk about ‘free markets‘ and the virtues of ‘private market disciplines‘ go out the window should the actual discipline of markets impose losses on these institutions.” –Marshall Auerback