Wednesday, June 24, 2009

Foxes guarding the henhouse

Freddie Mac and Fannie Mae plan to tighten the standards under which they would guarantee mortgages in new condominium developments.

Democratic Representatives Barney Frank and Anthony Weiner have asked them to reconsider, arguing that tighter lending and guarantee standards "may be too onerous."

Read the whole story here.

It's proof that lawmakers have yet to understand some of the fundamental causes of the recent housing market bubble/bust.

If our leaders do not understand that government interference in private markets was a principal cause of last year's financial crisis, what chance is there that Obama' proposed expansion of our regulatory apparatus will do any good?


alstry said...


As long as tighter lending standards is the game....the deteriorating outlook will remain the same:

From the WSJ:

DETROIT -- GMAC LLC is suspending wholesale financing for certain Chrysler Group LLC dealers it considers to be too risky to lend to, both GMAC and Chrysler confirmed on Wednesday.

The move could ultimately push some dealers out of business and hurt Chrysler's ability to sell cars.

GMAC's goal in part is to shore up its own financial position by avoiding risks it can not afford, Mike Stoller, a company spokesman said.


__ said...

Scott, perhaps also worth drawing attention to this: The longer govt intervenes in the private sector, the worse the prospects are for recovery, IMO.

Public Library said...

The B.Frank dilemma was/is entirely predictable. Our government does not have the will to make the sacrifices necessary to move us forward. That is what has been at the heart of all these bailouts. Trying to “manage” the sacrifice instead of letting the market dictate how resources are allocated. This = years of muddling, mistakes, and misery.

I think this is where your optimism and my skepticism tend to diverge. I would like to believe we have the guts our grandparents displayed in the past, but something tells me we are a much different populace these days.

Scott Grannis said...

Government intervention will surely slow the recovery, and I've made that point many times. Fiscal policy can be horrible and the economy can still grow. I hate the policies out there, but I am still mindful that this is a huge and intrinsically dynamic economy that has overcome many obstacles in the past.

Daniel said...

Its funny you mention. Bush FINALLY came out last week and mentioned this:

"Government does not create wealth. The major role for the government is to create an environment where people take risks to expand the job rate in the United States,"

Read the article here

Scott Grannis said...

Where was Bush's wisdom when we needed it?