Matt Yglesias

25 Responses to “Keep Digging!”

1. Doogs Says:
   November 24th, 2008 at 8:33 am

   Well, duh. It’s the builders’ lobby. Of course they’re going to push for something of this sort. Higher home prices = higher profit margins on new construction.

2. Walker Says:
   November 24th, 2008 at 8:40 am

   One of the chief economic arguments in favor of subsidizing home ownership–and a point which I do not recall Matt ever addressing–is that increases in wealth in the form of home equity lead to increased consumption faster than increases in wealth in the form of other assets (such as securities)

   So does subsidizing tulip bulbs.

   All you are pointing out is that housing speculation gives people money, either directly from selling, or indirectly from home equity loans. Ponzi schemes are not maintainable, and are a disastrous way to set economic policy.

   We already have crazy subsidies as it is — the mortgage interest deduction. If we had any more they will be just as politically impossible to remove as that tax break. So the net effect will be that houses will go up permanently, benefitting people who own and screwing those who don’t.

3. Pete Says:
   November 24th, 2008 at 8:56 am

   For a really depressing read, see the Business Week article on how the same people that pushed the subprime loans on people that couldn’t afford them are now pushing FHA loans on people that can’t afford them.

4. joe from Lowell Says:
   November 24th, 2008 at 9:01 am

   So does subsidizing tulip bulbs.

   People aren’t already spending, and required to spend, several hundred dollars every single month on tulip bulbs, whether renting or buying them.

   Promoting homeownership means that said inelastic expense becomes and investment rather than just a cost, producing a nice little nut for the family.

5. joe from Lowell Says:
   November 24th, 2008 at 9:01 am

   …which is NOT to say that anything like the Homebuilders’ lobby’s bailout plan is a good idea.

6. El Cid Says:
   November 24th, 2008 at 9:05 am

   Not that we have any useful historical examples, and of course the best solution is to cram through “bailouts” while the president of the party of anti-Constitutional crony criminals is still in power.

   The Home Owners’ Loan Act of 1933 created the HOLC. The agency eventually grew to about 20,000 employees but was designed as a temporary program “to relieve the mortgage strain and then liquidate,” as one early description put it.

   The Treasury was authorized to invest $200 million in HOLC stock. In current terms, based on the consumer price index, that’s about $3 billion, but if adjusted based on the change in gross domestic product per capita since 1933, it would be about $20 billion. The act initially authorized the HOLC to issue $2 billion in bonds, or 10 times its capital, which relative to GDP per capita would be about $200 billion today.

   The idea was that for three years the agency would acquire defaulted residential mortgages from lenders and investors, give its bonds in exchange, and then refinance the mortgages on more favorable and more sustainable terms. Lenders would have a marketable bond earning interest, although with a lower interest rate than the original mortgage, in place of a frozen, non-earning asset.

   Lenders would often take a loss on the principal of the original mortgage, receiving less than the mortgage’s par value in bonds. This realization of loss of principal by the lender was an essential element of the reliquification program — just as it will be in today’s mortgage bust.

7. Dan Says:
   November 24th, 2008 at 11:25 am

   WTF??? The house in that picture is where I grew up! Literally! It’s where my parents currently live! And now it’s being foreclosed on?

   (I know, I know . . . blame photoshop.)

   (And yeah, even I thought it was a pretentious McMansion when I was a kid.)

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