Paving the Road to Hell

President Bush's announcement Saturday morning of a new massive Federal agency that will buy bad loans from financial institutions in an attempt to stabilize the United States economy is the latest sad episode in our national soap opera, General Insanity. Treasury Secretary Hank Paulson estimates that it will cost the U.S. taxpayer about $700 billion to sort out this mess, which averages about $2333 for every man, woman and child in the United States over and above the trillions of debt we've already accumulated, or, since the bottom thirty percent of Americans pay no Federal income taxes at all (a dirty little secret that Senator Obama and his liberal colleagues don't like to advertise), about $3333 for every tax-paying American. If there's a better word than "staggering" to describe such a figure, someone please tell me.



The near-collapse of the financial market - Federal bailouts of Bear Stearns, Fannie Mae, Freddie Mac and AIG, the sale of Merrill Lynch to Bank of America, frantic reorganization for Morgan Stanley and Goldman Sachs - is of course tied to the struggling American housing market. Millions of people have either defaulted on their mortgages or are close to it, so that the institutions who own the mortgages or insured them are also threatened. So why are so many people in this financial distress, how did they get here? Because they were bad credit risks to begin with, and were approved for home loans that they couldn't afford. Bankruptcy, late payments, missed payments, heavy consumer debt, prior defaults, judgments, nothing seemed to completely disqualify this demographic for a mortgage, and if we multiply this scenario by two or three or ten million, we arrive at our current pathetic state. So then we ask the next question: Why would so many otherwise responsible institutions loan money in the trillions to people who wouldn't or couldn't pay it back? Because of that bulwark of social engineering, the United States Congress.



During the Clinton administration, those wonderful years of Whitewater, Travelgate, Elian Gonzalez and the stained blue cocktail dress, Congress got it in their collective heads that the American dream of owning your own home should not be reserved for those who could actually pay for it. The idea was that home owners make better citizens, which is a pretty traditional view, and if "underserved" people could somehow obtain a mortgage, helped by the Federal government, then they and America in general would profit. Look at this quote from the HUD website:



Voluntary Activities


The Fair Housing Act requires HUD to develop voluntary programs to achieve fair housing goals. For example, HUD's Voluntary Affirmative Marketing program is designed to engage the private sector, including builders, developers, lenders, and the real estate industry, in national and local efforts to improve housing choice. Voluntary efforts include local agreements to further fair housing, the establishment of citizen Community Housing Resource Boards (CHRB) to maximize communication among racial and ethnic minorities, women, and the real estate industry, in connection with enforcement of the agreements.



Source: http://www.hud.gov/offices/fheo/promotingfh.cfm



This means that the Federal government coerced banks to lend lots of money to people whom they knew would have a hard time paying it back. Congress didn't consider the disaster that would ensue if the scenario played itself out, as we face now, they didn't consider the cesspool of bankruptcy, foreclosure, the tens of thousands thrown out of work and the Everest of debt now heaped upon America: Congress just thought it was a good idea, and so here we are. So if you're looking for someone to blame for this train wreck, call (202) 225-0100 and ask for Nancy.