Wednesday, May 19, 2010


Matthew Continetti in the Weekly Standard's blog on May 13th:
Since 2008, the federal government has been trying to mitigate the worst effects of the recession while making sure the financial crisis "does not happen again." But in order for the government to succeed, one would have to identify the underlying moral hazards and eliminate them. One would have to say -- and this would be upsetting for many -- that home ownership is not for everyone. One would have to say that, in order to get a mortgage, an individual ought to be able to show that he is personally responsible. And one way to demonstrate personal responsibility is through the accumulation of savings for a down payment.

Sen. Bob Corker, Republican of Tennessee, introduced an amendment to the Senate financial regulation bill yesterday that would have required a 5 percent down payment for potential home buyers. For home buyers who put less than 20 percent down, the Corker amendment also would have required purchasing private mortgage insurance (the Canadians, who emerged from the crisis relatively unscathed, have something similar). We're not talking requiring a 30 percent down payment for new home buyers. We're talking 5 percent.

You know where this is headed. The Senate defeated the Corker amendment, 57-42. Many Democrats argued the requirements would hurt minority home buyers. But what hurts home buyers more -- standards that encourage savings, discipline, and personal responsibility, or putting people into situations where they could face foreclosure and bankruptcy? . . .

But then, why would The World's Greatest Deliberative BodyTM think boldly and imaginatively, when it can just beat up Goldman Sachs?


Bob in Los Angeles said...

Any idiots still left that think CRA had nothing to do with the housing boom/bust cycle?

Right now, our tax dollars -- Yours and Mine -- are used to encourage bad credit owners (or those with zero credit history) to purchase homes that stretch every inch of their income potential. Often times with what is called 'stated income'. That means people can make up a household income. No proof required.

These poor risks assume all of the benefits and none of the risks of home ownership, as they have no skin in the game -- no down payment!

Excuse me, how is taking my money to give it to irresponsible inbred trailer trash yokels -- and those that feed on them -- not a crime?

Thanks for this Carl.

Assistant Village Idiot said...

It wouldn't hurt minority home buyers. It would hurt the reputations of people - including especially politicians - who claim to be helping minorities.

Actual help doesn't matter. Hell, we've seen that you can actively harm minorities, so long as you can preserve your reputation for helping them.

Rick Caird said...

I am not upset to see the federal government not pass a minimum down payment requirement for banks, et. to follow. That is up to the banks. Just don't ask to get bailed out if the loans go bad.

It would be reasonable to set a restriction like that on the loans Freddie and Fannie can buy, though. That is the province of the Federal government.