by Mitch Kokai
Senior Political Analyst, John Locke Foundation
John Stossel has watched this movie before, and he didn’t like the ending the first time around. By “movie,” I mean the collection of government policies that inflated the last housing bubble. In his latest column posted at Human Events, Stossel documents the repeat performance.
The bubble popped in 2007. Lots of people were hurt, and politicians took more of your tax money to bail out Fannie Mae and Freddie Mac along with reckless banks. They also gave the Federal Housing Administration a $2 billion bailout.
Then the politicians said, “We’ll fix this so it doesn’t happen again.” Congress passed Dodd-Frank and a thousand new regulations. The complex rules slowed lending, all right. It’s one reason this post-recession recovery has been abnormally slow.
But — April Fools’! — the new rules didn’t solve the problem of reckless lending, and it’s happening again.
Because our government subsidizes home purchases, recklessness is invited. Somehow, Americans buy cars, clothing, computers, etc. without government guarantees, but politicians think housing is different.
Both parties support the subsidies.
The left wants government to help struggling families, and the right thinks home ownership sends a wholesome cultural message. Both parties have cozy connections to home-builders and lenders. …
… After the bubble popped, I assumed the political class would learn a lesson, but they haven’t. Today, even more American mortgages are guaranteed by government. More than 90 percent of new loans are backed by taxpayers. After the crash, Fannie and Freddie did raise their minimum down payment — to a measly 5 percent — but a few months ago, they lowered it again to 3 percent!