June 17, 2008

HousingPANIC Stupid Question of the Day

Would the housing bubble (and now crash) have even happened if it were not for the Real Estate Industrial Complex's corruption of our public officials?

Here's a starter list - feel free to add to it..

* Mortgage interest tax break
* $250,000 / $500,000 cap gains exclusion
* No oversight of toxic lending
* No oversight of mortgage brokers, appraisers or realtors
* "Friends of Angelo" obvious bribery
* Rampant NAR, NAHB and NAMB PAC payola payments to corrupted Congressmen
* Eminent domain used to favor developers over property owners
* Politicians whose main asset is real estate attempting to put a floor under falling real estate prices with a massive taxpayer-funded housing bailout


keith said...


The housing crash: a Democratic scandal?

As the old man’s Presidential campaign mutters along, and John Ensign would be thrilled to only lose a handful of Senate seats, and Republican hopes look generally bleak, Republicans should mine the rich material of the housing bubble.

As housing prices continue to plummet through the summer and fall, the housing bubble and crash and ensuing economic fallout is sure to rank high on the list of issues in voters’ minds. And so far, it appears to be an overwhelmingly Democratic scandal:

* Fannie Mae is at the heart of the problem for using its government-sponsored status to guarantee billions of dollars in bad loans that never should have been made. Fannie Mae’s guarantees helped kick off the easy-credit lending spree that created the bubble. Fannie Mae is essentially a personal enrichment vehicle for Democratic functionaries like Franklin Raines and Jim Johnson, who became obscenely wealthy by being appointed to lead the government-sponsored enterprise. Fannie Mae will likely require a massive taxpayer bailout as more loans continue to go bad.

* Housing bubble poster boy Angelo Mozilo of Countrywide had a "Friends of Angelo" program where he gave mortgage discounts to legislators and policymakers, the overwhelming majority of whom are Democrats, including Senator Chris Dodd, Senator Kent Conrad, and the aforementioned Jim Johnson. The highest-profile Republican named in the scandal so far is already-disgraced ex-HUD Secretary Alphonso Jackson. These special loans appear to be a clear violation at least of Congressional ethics rules, if not of laws.

* Foreclosure Queen Laura Richardson, Democratic Congresswoman from Long Beach, defaulted eight times on three houses, and is now being sued over a very fishy rescinding of a foreclosure. Special treatment, anyone?

From a policy substance perspective, it’s clear that liberal (i.e. expansionist goverment) policies contributed to the bubble. "Affordable ownership" programs threw credit standards out the window and had the perverse effect of driving housing prices to levels that were far from affordable. The solution is a return to a private market where the lenders bear the risks of the loans they make (yes, securitization and sale of loans to foolish third parties was also a huge problem, but the buyers have wised up to that!). Over time, houses will return to prices where average families can afford them with a 20% down payment and a 30-year, fixed-rate loan.

Anonymous said...

Because of all the valid points you make as to how this thing happened, I do not understand why you think Angelo is going to be arrested. Foxes run the henhouse. The whole thing was enabled by the foxes, overlooked by the foxes, and now is being bailed out by the foxes. Angelo is one of the foxes. WE are all the hens. Why is there only 1 Ron Paul in Congress? He is a dinosaur servant of the people and when he is gone, there will be no replacement. The whole thing stinks to high heaven and the only thing that will fix it is a modern "Bastille Day".

Anonymous said...

How can this be? Nancy Pelosi assured me if I voted D in 2006 corruption in politics would end.

Anonymous said...

Just vote for Obama and all will be well.

Friends of Angelo, Dodd, and Conrad said...

A major missing item is programs such as land preservation. In Maryland for example, rich families have farms with hundreds of acres. Many of these farms are waterfront. Land preservation programs sponsored with taxpayer dollars have bought the development rights to these farms, often for more money than the families paid for them. In the end, they've basically gotten free waterfront mansions and many of them would never have developed the parcels to begin with. Not to mention these bogus farms are taxed at a much lower agricultural property tax rate.

And this did what for the taxpaying public?

Agent 99 said...


Andrew from Russia said...

> * Mortgage interest tax break

IMO this is one of the ugliest things, one that is unfortunately being replicated in other countries today. In effect, the taxpayer is programmed for a specific lifestyle when it becomes painful NOT to borrow. Subsidize mortgages, penalize savings, deregulate lending, target "comfort zone" inflation - and get a debt bubble aggravated by overconsumption conditions in the end.

Mammoth said...

Are the following bullet points really due to corruption, or just due to government incompetence?
* No oversight of toxic lending
* No oversight of mortgage
brokers, appraisers or realtors
I believe that it was the latter.

Anonymous said...


I realize you're single but actually that's a $500,000 Cap Gains Exemption if you're Married Filing Joint. ( Certainly not enough to influence people's behavior? )

Am I the only guy that got tired of people you KNEW had less than 10 grand in their 401K pretending getting a hundred, two hundred, six hundred grand in TAX FREE money was no big deal?!

Oh and don't forget to write off your property taxes against your Federal return! ( But we need a "credit" for buying a new home? ) As the Tax Policy Institute noted, it simply isn't possible to bend over backwards any further than we already have.


san francisco native said...

I agree that the liberal policies are partially to blame for the housing bubble. It is important that lenders and buyers are privately taking on the risks of their real estate/monetary decisions. The only thing predictable and hopeful about the housing market is that it will always recover in time.

mreynolds said...

Just remember the NAR can see the Capitol in DC from their conference room. They think they own it.

keith said...

DinOr - I fixed the post with the $500,000 REIC wet kiss

That one piece of legislation is what ignited the housing bubble

Anonymous said...

Actually, Bush issued an executive order prohibiting the federal government from exercising eminent domain to benefit a private party. There's something the MSM won't tell you. :) However, the order only applies to the feds, not state or local governments.

Really, though, eminent domain has been around a long time and has roots in the tax base. Should we all pay higher taxes, or allow eminent domain to exist where slums get torn down to make way for a higher-tax-revenue-generating office building?

keyser soze said...

This touches upon the most aggravating part of the housing bubble and subsequent bust. It could have been stopped, or slowed down, by so many entities including but not limited to:
IB underwriters
bond insurers
MBO & CDO buyers
bank regulators

Any one of the previous peeps could have blown the proverbial whistle. I have been a lender since 1983 and Richard Bove said it best...people with bad credit don't pay their bills.
I feel for people who have had misfortune in life, but for their own good, they do not need to borrow money until their get their credit cleaned up.

Anonymous said...

"...vote for Obama and all will be well."

I'm with you for McCain.

Either he or the current loose cannon will attack Iran, and we'll see $200(or more) oil.

You'll see. said...

"As the Tax Policy Institute noted, it simply isn't possible to bend over backwards any further than we already have."

Oh Really? With due respect to a fellow HPer, just wait a little longer. With people like Frank and Dodd and Conrad in power, nothing is out-of-the-question.

You'll see.

gutless and lazy, burn down D.C. said...

Public enemy #1 to the good people of the USA ... the United States Federal Gov't!!!

Believe it!!!!

Anonymous said...

How about the food bubble caused by the $162 billion pork barrel farm bill passed by Nancy Peloser and Harry Reid? The beneficiaries were large corporate farms. The government/taxpayer is paying farmers not to grow food and cause prices to skyrocket and shortages. The bill was vetoed by Bush and it was overridden by the corrupt Congress.

wc said...

Greenspan keeping interest rates artificially low had a little something to do with it too - I think 9/11 threw a real kink into things. I also blame Cramer for screaming that the Fed couldn't raise the rate because I somehow think the Fed listens to him or at least they always seem to do exactly what he says they will do. And I think this falls under bank regulation but no one should ever be allowed to buy a house worth even 5x their income with less than 20% down.

Agent 99 said...

Eminent domain...I've been watching with interest Long Branch, NJ...The City of Long Branch blighted blocks and blocks of beachfront property and sold the property to Condo Developers. We lost our beach access. There's still a fight brewing...but taking private property to "give" to private developes for Condos is obscene.

Anonymous said...

no the whole thing was caused by the FED and this was done on purpose at this particular time for a specific reason. the whole thing is one big conspiracy. i know, it sounds crazy, but look at the facts and then think about it. it appears that they are going to extend this out to sometime in the future i think, unless they totally lose control of it. what they are waiting on, i am not sure. perhaps they want the rest of the money that the baby boomers have saved up over the last 50 years or so. they already have a big chunk of it, but the fact is they want it all. just like george carlin said in the american dream segment....


vanilla ice said...

How about Fannie Mae, Freddie Mac, the Federal Housing Administration. Why don't we just say it? We're socialist.

keyser soze said...

Anonymous said...
How about the food bubble caused by the $162 billion pork barrel farm bill passed by Nancy Peloser and Harry Reid? The beneficiaries were large corporate farms. The government/taxpayer is paying farmers not to grow food and cause prices to skyrocket and shortages. The bill was vetoed by Bush and it was overridden by the corrupt Congress.

June 17, 2008 6:31 PM

Don't get me started on the 'poor farmers'. The farmers are laughing all the way to the bank with your tax dollars, let alone $8 corn and $16 soybeans and a tripling of value of their farm land this decade.
They'll be whining all the way to Florida this winter.

Don't let this flooding fool you...the farm-mafia has known for 100s of years which land floods during heavy rains(see county floodplain maps). They bought that land for a song and a dance and expect it to flood out at least once every 5 years...no biggie...but beware when they, once again, cometh to the taxpayer, with cup in hand.