There they go again — Obama administration officials, that is. They’re throwing billions of tax dollars (borrowed from China and other foreign lenders) to bail out mortgagors and thus keep them from suffering the consequences of the toxic assets created by their ill-advised lending. Only this time, it’s not a highly suspect private sector operation getting the billions, it’s state and local government housing agencies. The feds are planning to shell out at least $35 billion to enable these housing finance agencies to continue making low-interest loans to low- and moderate-income borrowers trying to buy homes.
The housing finance agencies are a comparatively small part of the home mortgage industry, but they are especially sensitive to federal housing policies, including those adopted during the Clinton years to “loosen up” lending standards in the ACORN-encouraged effort to make government the lender of first resort for people who cannot qualify for loans from private lenders.
In other words, the Obama administration is preparing to pour $35 billion down the same rat hole that caused the housing bubble that led to the economic crisis of 2008. The plan reportedly includes $20 billion from Fannie Mae and Freddie Mac to pay for new state-issued housing bonds, plus another $15 billion to continue specialized, low-cost loans in the subprime mortgage market. If buyers stop making payments or the issuing agencies default for whatever reason, guess who gets stuck with the tab? The same taxpayers who are now paying the freight for the $700 billion TARP bank and auto industry bailouts, plus trillions more in federally guaranteed loans, pensions, and entitlement benefits. But hey, what’s another stack of billions as the national debt soars to levels not seen since World War II? So what if the debt isn’t likely to be paid off in our grandchildren’s lifetimes?
Besides President Barack Obama, this new housing bailout program is being pushed by Senate Banking Committee Chairman Chris Dodd, D-Conn., House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., radical subsidized housing advocates like ACORN and other backers of the host of low-cost lending programs on Wall Street and in the U.S. Department of Housing and Urban Development. As the Hoover Institution’s Peter Schweitzer argues in his new book, “Architects of Ruin,” these folks missed the most basic lesson of the 2008 meltdown: Throwing more good money after bad mortgage risks is an invitation to another round of misery.