Congress urged Fannie Mae and Freddie Mack to relax the requirements for loans so that Americans could have access to affordable housing. That fact alone shows a lack of understanding (to be generous) in how the economy works. They didn’t make houses more affordable, they made loans seemingly more affordable.<\/p>\n
So, more people are able to get loans to buy houses, and the demand goes up.<\/p>\n
It’s been 30 years or so, but if I remember my basic Econ 101, when demand of a product goes up, the price doesn’t go down; it goes up.<\/p>\n
Congress basically flooded the market with buyers, and the market reacted as it should: real estate increased in value. But then those buyers really couldn’t afford the loans, so they started defaulting on them. Now you have a situation where the massive influx of buyers goes away. Demand goes down, so price goes down. Now those homes aren’t worth as much as they were when they were bought, giving the banks a double whammy. They can’t get the money back that was loaned out, and eventually they go bust.<\/p>\n
But, Joe Taxpayer is here to bail them out, so far to the tune of nearly a $1,000,000,000,000. Why is it no one writes that number out? I guess it doesn’t look as bad when you see $1 trillion.<\/p>\n
This kind of reminds me of that TV show, Extreme Makeover. They basically give a down and out family a brand new furnished house. Do they even consider if the family can afford<\/a> the new house? You have property taxes (that just went through the roof), income taxes, and probably a ton of other taxes. But family after family is having to give up those houses because they can’t afford them.<\/p>\n Of course, some of those folks are apparently just bad with money<\/a> to begin with. Those are exactly the folks who shouldn’t be getting loans.<\/p>\n It’s the same “feel-good” philosophy the Democrats have. They do something today that makes them feel good (“look at all those folks getting new homes!”), but never think about the future (“look at all those poor folks losing their homes!”). So basically, it’s not about helping folks, it’s about making themselves feel like they’ve helped people, regardless of the outcome.<\/p>\n","protected":false},"excerpt":{"rendered":" Congress urged Fannie Mae and Freddie Mack to relax the requirements for loans so that Americans could have access to affordable housing. That fact alone shows a lack of understanding (to be generous) in how the economy works. They didn’t … Continue reading