The View From 1776
Monday, February 13, 2012
Obama’s Latest Election Campaign Pandering
The administration’s Keynesian bent leads to continual tinkering and intervention in housing and other markets, on the assumption that an academic and political elite can manage the economy by issuing decrees from Washington. To a larger extent than in the past this may be true, given the regulatory take-over of the entire financial sector. Don’t expect, however, that government control will revivify the housing market or prevent future booms and busts, so long as the Federal Reserve invariably floods the market with fiat money.
Obama’s latest proposal will delay, yet again, clearing the market of excessive housing inventory by leaving housing in the hands of uncreditworthy mortgagors. It will also reduce lenders’ future willingness to make mortgage loans, now knowing that the government will abrogate their property rights with mortgage loan cram-downs.