The Wall Street Journal is running an editorial that examines how the current Congress is setting us up for our newest housing bust and bailout.
Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.
The FHA is almost certainly going to need a taxpayer bailout in the months ahead. The only debate is how much it will cost. By law FHA must carry a 2% reserve (or a 50 to 1 leverage rate), and it is now 3% and falling. Some experts see bailout costs from $50 billion to $100 billion or more, depending on how long the recession lasts.
And you will never believe which caucus supports this.
As soon as this new sub-prime market crashes, the same Socialist-Progressive Democrats pushing these loans will blame capitalism and greedy predatory lenders for signing the very mortgages the government tells them to.
[...] will be out of style soon, so they need to get rid of it – hey, maybe it will be. It’s also almost like they’re trying to make our problems worse in order to blame it on the other party …, just like they do with gas prices every summer. Meanwhile, do any of their economic policies [...]