Barney's New Bubble

Barney Frank is headlining the Housing Bubble reunion tour only this time he’s leaving the private banking sector—or what’s left of it—off stage.  Barney’s plan is to use the Federal housing Administration as the new primary purveyor of sub-prime mortgages, cutting out the middle man and exposing the tax payer to all the liability. 

Will it work?  There is ample evidence that the FHA’s updated guidelines are responsible for the most recent bubble that resulted in GDP growth in the third quarter of 2009.  The FHA is looking to back close to 40% of all loans, according to the Washington Times, upping its ante to cover mortgages up to 729,000 dollars.  The FHA still accepts borrowers who have little or no money for a down payment (3.5%), who have been foreclosed on before, have a bad credit history or no history, and allowed them to use the 8000.00 credit to cover the down payment or closing costs.   So all of this is happening on the backs of taxpayers, and industry analysts project that 20-30% of these borrowers will default, placing 100% of the burden for default on taxpayers as well. 

While Rep Frank continues to insist he was not complicit in the regulatory market manipulations that precipitated the last bubble (which makes him either a liar or total incompetent) he heartily supports the FHA and its continued commitment to backing mortgages with your tax dollars.  He has even voiced support for plans to expand the kind of outlets that can offer up these loose taxpayer backed loans.  But the people who refuse to be held accountable for the last housing crisis, would like very much for you to believe that doing the exact same things—and exposing the taxpayer to more risk, is a better way to go, as long as the government has more immediate oversight of next Sub prime Mortgage crisis.  

So do Carol and Paul Hodesheaporter support this?  Maybe you should ask them?  Last time I checked they were still the governments House representatives to New Hampshire.  Ask them if its a good idea to give people with no money $8,000 of your money for a loan 1 in 3 of them will default on, which you will then have to pay for? (See crippled economy for more details)  And more importantly, when it explodes, how in heck are they going to find a way to Blame George Bush for it.