New subprime lending will mean another housing crash. This time there’s no question what will happen.
It is unbelievable that the White House is actively promoting another housing crash, but the evidence is undeniable.
The Washington Post reports,
The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.
President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.
In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.
There is no way I can express the sheer insanity of this policy. It was equally insane when the Bush Administration did it, but now we have all experienced the consequences. Once again President Obama is showing himself to be just a continuation of the Bush regime.
The Washington Post story quotes John Taylor, president of the National Community Reinvestment Coalition, “a nonprofit housing organization.” I found the NCRC’s YouTube channel. It is noteworthy that their last video was posted on April 23, 2008.
After the TARP bailout I guess the organization decided to go quiet for a while.
I ought to mention that the corruption goes deeper. This blog post shows that we have been in recession since 2001, but that was hidden because of mortgage equity withdrawals.
So to put it bluntly, US homeowners have been using their houses as ATMs. The equity they withdrew fostered the illusion that our economy was healthy and growing. But the spending growth was not fueled by new savings that was invested to increase production. Instead, current assets were leveraged and consumed to fuel the GDP. In some cases, the assets were realized capital gains (such as home sales) but in other cases, the gains were unrealized (such as home equity loans). And now that the housing market has been crushed, this fire hose of funds has been reduced to a trickling garden hose at most.
So for politicians, home mortgages were a magic spell that gave us fake economic growth for seven years. Then, when the inevitable collapse took place, the government gave itself more power (“Never let a crisis go to waste.”) No wonder Barack Obama wants to try to keep the housing bubble inflating.
But as night follows day, that means he wants another housing crash.