Housing

Here are two posts at EconLog and Marginal Revolution about the report the administration is supposed to release today containing proposals for reforming federal involvement in the mortgage market.

They reminded me about a conversation I had a few weeks ago with a friend who is now working at Freddie Mac.  I asked him how things at Freddie were going, and his response was a simple "It's all F***'ed."  And this is coming from a scrupulously polite, well-heeled south Asian gentleman.

By his calculations, IIRC, in order for them to pay back the bailout funds they received over the last couple of years they would have to equal their most profitable year for 23 years in a row.

PS Arnold Kling on Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance.  Based on his reading, the thesis is that Fannie & Freddie were very naughty, but that government mucking about in the mortgage market is good and proper if, in Kling's words,

The government guarantee should be restricted to standard mortgages for purchasing homes, rather than to facilitate speculation in housing. No sub-prime loans. No cash-out refis. No high loan-to-value ratio loans. No second mortgages. No loans for non-owner-occupied homes.

I have absolutely no reason to believe that Congress will ever be able to, or even desire to, stick to such a commitment.

PPS For instance: "$14/Hour Buys You a $175k House." Gaaaaaaaaahrrrrrrrrrrrr. (Via Ilkka.)

On the one hand, I'm going to go get the transmission fluid of my mind flushed because all my gears have just had their cogs ground clean off. On the other hand, if the goal is to raise your own standard of living by any (legal) means necessary, then I can't fault her for savvyily taking advantage of the largess that our society, in it's infinite wisdom, has chosen to make available to her. But on the gripping hand, if the goal is to be a productive member of society, to produce more than you consume, and to endeavor to live without resorting to the (forced) charity and generosity of your neighbors, then this is absurd.

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Edited to add — Here is Kling on the report that the White House released.  His final summary: "With so little detail spelled out, all we are left with is a proposal for the government to take unknown risks in an unknown way with unknown consequences. I assume that more information will be forthcoming." Like him, I agree we need to get at the underlying questions of motivation and goals regarding housing before tackling issues like what new agencies to create. Addressing such foundational questions are not the strong point of any administration though, and I would hazard to add that they seem to be an especially weak point for a "technocratic" or "academic" one like that assembled around Obama.