Home, Sweet Unattainable Home
It is an article of faith among free marketeers that Fannie and Freddie were the real culprits in the 2008 crash, because they allowed Wall Street to create this toxic crap and then cycle them over to Fannie and Freddie, getting them off their books. In this telling, Fannie and Freddie was the bar where the alcoholic kept buying his drinks. Rather than send the alcoholic to rehab, we want to close the bar.
The thing is, not everyone who drinks is an alcoholic. Bars can be really nice places that serve an important function as societal glue. Samuel Adams ran a tavern.
By getting rid of Fannie and Freddie - by closing the bar - we are going to get rid of the most important function that they provide: the 30 year, fixed rate mortgage. We could not have afforded our home without a 30 year mortgage. Now, admittedly, right now, we wish we didn't own our home. The roof is leaky, ice dams have sent water cascading into the walls and we've lost job mobility. Not to mention the enormous percentage of our monthly wages that go into paying off the mortgage.
The effect of killing the 30 year mortgage will be to significantly reduce demand for homes and increase renting. Which is kind of what the Fannie-Freddie assassins want to do. Home ownerships does create certain problems with worker mobility. And why, after all, should the stinking proles get to own a home?
Banks don't like owning 30 year mortgages because it winds up a very conservative, bond-like investment that ties up their capital. So they sold most of them to Fannie-Freddie. Without Fannie-Freddie, there is the potential for a financial entity to rise up and take its place, say the free marketeers. Yeah, maybe.
Or, we could wind up with housing prices - particularly in the middle class type of house - continue to fall.
The Fannie-Freddie assassins would say that this is simply returning the housing market to its natural pricing level.
To which I say, screw you!
I - and millions of Americans like me - own a home. This represents a significant form of our savings. The mortgage payment is - in our eyes - a form of forced savings. We put a little money into the mortgage and 30 years from now, around when we retire, we have a nice asset to help fund our retirement. Oh, and a place to live.
This strikes me as another example of the market austerity fetishists. Having money themselves, they are fine with inflicting pain on millions of people to create a nice orthodox free market. But the societal costs of that will be huge and painful.
It is Wall Street's world and we're just living in it.
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