published Sunday, January 29th, 2012

Sen. Corker rightly condemns reckless proposal on housing

For excellent reasons, U.S. Sen. Bob Corker of Chattanooga is condemning a new proposal to involve the federal government more deeply in the housing market -- a housing market that federal manipulation helped to bring down in the first place.

The painful history of government-run mortgage giants Fannie Mae and Freddie Mac is as clear an indication as any that Washington needs to get out of -- not get more heavily engaged in -- the housing market.

That history includes federal government pressure on lenders to dole out home loans to borrowers whose income and credit history did not justify the loans. Such policies ignored reality, and many borrowers soon were unable to make their payments, causing a massive spike in foreclosures.

That devastated millions of families financially, and the 33 percent average drop in home prices from 2006 until today has destroyed $7 trillion in household wealth!

But the damage did not stop there. Because government-backed Fannie Mae and Freddie Mac assumed the risk for those bad loans, taxpayers -- most of whom never took out the shaky loans -- were on the hook for the losses. Well over $160 billion from taxpayers has been used to bail out Fannie Mae and Freddie Mac -- so far. Not long ago they requested billions more to cover their losses from just the third quarter of 2011.

But even as the bailouts flowed, the federal government seemed determined to throw good money after bad. With foreclosures rising to alarming levels, Washington tried more interventions to "solve" the troubles created by its earlier meddling.

In parts of 2009 and 2010, Congress offered home buyers tax credits of up to $8,000 in an effort to improve sales and rescue the housing market. The effort failed. Some people did buy houses who otherwise might not have done so. But the credit -- courtesy of other taxpayers -- was enjoyed by large numbers of people who were going to buy anyway. And once the costly subsidy ended, sales plunged again. 2011 was probably the worst year for new-home sales in U.S. history, The Associated Press noted recently.

To add insult to injury, the tax credits put our nation deeper in debt -- and more than half a billion dollars was fraudulently or erroneously paid out to people who didn't even qualify for the credits.

So Corker's deep skepticism toward yet more federal intrusion in the housing market is not only timely but right on target.

The object of his criticism is a proposal by William Dudley, president of the Federal Reserve Bank of New York, to let some homeowners slash the principal that they owe on loans guaranteed by -- you guessed it -- Fannie Mae and Freddie Mac!

Dudley wants many so-called "underwater borrowers" -- who owe more on their homes than the homes are worth -- to be able to reduce the principal on the loans, Bloomberg News reported. He also wants to create still more subsidies for home buyers, further distorting the market.

Corker was understandably disgusted by this plan to repeat failed policies.

"Reducing the principal on home loans for borrowers who put no money down amounts to a massive wealth transfer from places like Tennessee, where most homeowners have borrowed responsibly, to places like California and New York, where exotic mortgages were widely used to finance a speculative housing boom," he recently told a group of Realtors in Nashville. "It is absolutely egregious that the Federal Reserve would insert itself in this manner and ask people in Tennessee who played by the rules to bail out reckless borrowers in other parts of the country."

Instead, Corker sensibly wants to reduce federal involvement in housing finance.

We hope he succeeds. He plainly has the evidence of recent history on his side.

Comments do not represent the opinions of the Chattanooga Times Free Press, nor does it review every comment. Profanities, slurs and libelous remarks are prohibited. For more information you can view our Terms & Conditions and/or Ethics policy.

You know who ignores reality? You, because the reality is the banks were the ones recklessly engaging in shoddy mortgage practices which they used to distort the market for their own benefit, and then they went one step further and decided to practice fraudulent foreclosures where they made false statements under oath to get the government to act for their gain. That is something you never mention.

Why is that?

I agree that this plan is misguided, but that is because the criminals aren't going to jail and the victims are not getting justice. What we should do is build a prison on Wall Street and put the bankers in it.

January 29, 2012 at 12:53 a.m.
potcat said...

Well said hwtnbs, of course the free press editor is not only not going to tell the TRUTH about what really happened, the Private owned banks speculating and bundeling home loans are the Crinimals and not one went to jail.

By the way i like the new light bulbs too, i got some in my Christmas stocking.

If one is looking for TRUTH, skip the right side editorils!

January 29, 2012 at 4:39 a.m.
joneses said...

The best thing the government can do is stay out of the housing market as everything the government touches turns to crap. The actions by Barney Frank and Chris Dodd caused this mess and allowed the executives of Fannie May and Freddie Mack to receive rediculous bonuses. Where is the liberal outrage? Oh thats right thee is no outrage because they are not Republicans! Hypocrits.

January 29, 2012 at 7:26 a.m.

Joneses, Barney Frank and Chris Dodd? You didn't name one specific action by them that caused a problem. On the other hand, I can name the actions of Phil Gramm, Jim Leach and Thomas Bliley in repealing the elements of the Glass-Steagal act that kept finance companies from bundling savings and investments together, and eliminated numerous government regulations to prevent their misbehavior. Where is your outrage over that? Where is your recognition of that? No, instead you just blame two people because they're Democrats, and that's convenient to you.

Besides, you know who received a ridiculous amount of money from Freddie Mack? Newt Gingrich. So let's see your outrage that a conservative took payment from them while they were in the process of failing so badly.

BTW, if you feel everything the government touches turns to crap, you'll want to adopt anarchy as your banner, and call for the elimination of all of them.

January 29, 2012 at 10:41 a.m.
John_Proctor said...

"to receive rediculous(sic) bonuses"

What about the ridiculous bonuses received by the serial adulterer Gingrich? Oh, that's right there is no outrage because he is a "family values Republican" so those millions he took from Freddie Mac and Fanny Mae are simply bonuses, not lobbying fees. Nothing to see here; move along, no outrage needed. It's just another case of good old fashioned greed from the right.

January 29, 2012 at 7:53 p.m.
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