Most of the time when a burglar steals from a house and does not get caught, he doesn’t turn around immediately the next day and steal from it again. And this makes him smarter then the Federal Government.
The Federal Government since day one has blamed the banks and private sector for encouraging loans and giving out money to almost anyone. Even with artificially low interest rates set by the Federal Reserve and George W. Bush taking credit for the housing boom in 2004, the Federal Government denies any mistakes on their part at creating this financial disaster.
Well, without a doubt, the Federal Government is back “not” encouraging loose lending practices reports the New York Times:
“To the extent that the real estate market is functioning at all, people here say, it is doing so only because of the emergency programs, which have pushed down interest rates on mortgages and offered buyers a substantial tax credit.
Equally important is an expanded mortgage insurance program run by the Federal Housing Administration, which encourages private lenders to accept borrowers with small down payments. The government takes the risk of default.”
So basically, the government is using the taxpayer to insure against failing mortgages. Sound familiar? Let’s try the Economist in 2005:
“The global boom in house prices has been driven by two common factors: historically low interest rates have encouraged home buyers to borrow more money; and households have lost faith in equities after stockmarkets plunged, making property look attractive.
…
New, riskier forms of mortgage finance also allow buyers to borrow more. According to the NAR, 42% of all first-time buyers and 25% of all buyers made no down-payment on their home purchase last year. Indeed, homebuyers can get 105% loans to cover buying costs. And, increasingly, little or no documentation of a borrower’s assets, employment and income is required for a loan.”
It will be very hard for the banks to be blamed for this one, but then again who knew the American people would let the government get away with it in the first place.
