President Bush has dropped his threat to veto the massive Housing Rescue Plan, and it will likely be passed into law in the coming days. As a result, many financially irresponsible homeowners will be given more affordable mortgages and will not learn the lessons that will make the immediate and long-term future of our housing market more solid.
That’s not all. The government will provide what amounts to a massive bail out for Fannie Mae and Freddie Mac. Even worse, the government will have the option of directly acquiring billions of dollars in stock in those companies. My friend, that smacks of socialism.
There’s more to it. If you’re tempted to think this is a wonderful effort by the government, I encourage you to think about the ramifications past the immediate time:
- Irresponsible home owners will be left with the impression that the government can and should bail them out of bad situations, making future bad decisions more likely and contributing to a long-term instability in the housing market
- Executives at Fannie Mae, Freddie Mac and everyone else watching will see that the government is inclined to fund the “rescue” of large enterprises, causing future business leaders to expect the government to intervene upon massive failure. This will doubtlessly cause businesses to behave more carelessly in the future.
- The government will have established a model that allows them to take ownership in private companies. This is a very, very, very bad precedent.
This is a sad day for the real estate market. President Bush should be ashamed. Nancy Pelosi should be ashamed. Harry Reid should be ashamed.
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