This is disturbing. Not only are we all on welfare now, as David Freddoso puts it, but we’re also all on the hook for the housing bubble the government insists on keeping inflated. And so are our kids.
Inspector General Neil Barofsky testified last month about the TARP program, and the big takeaway was that the government’s policy of “too big to fail” has created even more risk in the financial system. But there was more, and it’s just as disconcerting.
Washington Examiner: Lost in the AIG headlines was another urgent warning contained inhis new report . An entire section details the federal government’s extensive efforts to reinflate the sagging housing bubble. Although Barofsky draws no staggering conclusions, the facts he presents are staggering all on their own — especially if you’re a homeowner.
If you watched with alarm as the government took over General Motors and Chrysler, and as Democrats tried to increase government’s role in the health care industry, you should be scared to death by Barofsky’s discussion of the mortgage markets.
The unspoken, bottom line: The federal government has already nationalized the housing industry. We’re not just talking about Uncle Sam providing a few subsidies, or even taking over a few of the big players, as they have in the auto industry. This is a complete takeover. Every new mortgage today is a government mortgage.
Over the last two years, government mortgage and mortgage-backed holdings have grown on net by nearly $1 trillion. Private investors and institutions have shed more than $1.5 trillion — through foreclosure losses, pay downs, and by selling to government.
The effective result is a government-run housing market. Barofsky reports that right now, the government is responsible for about 100 percent of all new mortgage activity. You read that correctly. To put it in his own words:
“According to Federal Reserve net borrowings data, the federal government and the organizations it backs now guarantee or issue almost all net new borrowings for mortgages and MBS.”
The accompanying graph, from page 109 of Barofsky’s report, shows that this is uncharted territory. Not even the savings and loan scandal of the early 1990s put all current and potential homeowners at Uncle Sam’s mercy as today’s situation has.
So even if you didn’t take out a government mortgage, there’s a good chance the government holds your mortgage. And even if you’re responsible and didn’t buy more home than you can afford, and make your mortgage payments on time, you and your kids are on the hook for the mortgages of everyone else.
I’m not sure how this is going to end – it’s unprecedented – but something tells me it’s not going to end well.
H/T Mike Church
[...] Reid’s campaign says he wasn’t there to help Reid win re-election. No, he was only there to talk about the economy and some foreclosure pork. Which we’ve already seen doesn’t work. [...]
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