Safe as Houses

Fallout from the housing bubble and bust has harmed a great number of people here and around the world, like a bursting appendix this speculative trainwreck will continue to ooze poison into the body politic for years if not decades. If you shout loud enough you can make the disaster anyone's fault you like, but blaming poor black people or misguided government policies ignores the speculative predation really at the heart of the collapse. Speculation is the practice of buying things simply to sell them later for a profit, most of the time these investments build value through bubbles and not real value. A certain amount of speculation can be productive in investment markets, but too much can be disasterous.

I've mentioned Matt Taibbi's Griftopia before, but it really is worth repeating. Yes, there were plenty of speculators buying houses with goofy interest-only mortgages and other batty-ass meatheads out there, but home ownership is one of those American traditions built up by the national storytelling and government policy. An awful lot of regular Americans were talked into buying or refinancing by slick con men who then deceived them with the details. Coincidentally, these were the majority of people tossed out onto the street by foreclosure as the government bailed out their banks. Why rescuing the idiot bankers directly when the government could have helped people stay in their homes and bailed out wall street's gambling at the same time is a question for another time. Now, containing the recommendations of very serious people for punishing those foolish enough to believe the propaganda of homeownership aspirations is, well, all that can be done.

Since batshit fascists have hijacked the national debate to "deficit reduction" instead of fixing the economy and all factors relevant to the average American and our limp-wristed president follows dopeily along, we can expect to see lots and lots of articles like this one. The authors are professors at NYU's Stern school of business so the rhetoric is couched in reasonable sounding language but the argument calls for fundamentally reshaping the American economy and thoroughly quashing one major aspect of Americans' expectations and aspirations. The latest sacrifice for the alter of "deficit reduction" is to take away mortgage interest deductions and any other "subsidies" that might help us. Use of that term is telling, it is a "subsidy" if public funds go to public purposes, bailouts of banks and other companies run into the ground by idiot executives, well that is something else. When your evidence that these policies don't help the purpose comes from that reliable bastion of objective research the american enterprise institute, warning flags should go up.

The article pays lip service to the substance of why these subsidies exist but does not name the banks that make out like bandits by enabling "people to borrow more than they could afford so they could buy houses bigger than they needed" but blame, as usual, both sides of the political aisle equally. Equally neglected is the bubble machine that enabled wildcat mortgage brokers and speculators to "make highly leveraged bets on real estate that turned sour and wiped out nearly $8 trillion in household net worth.' Taibbi locates the villain repeatedly blowing bubbles as alan greenspan, but he had a lot of help, mainly from wall street gamblers and their grifter par excellence goldman sachs.

Since the liberal position on ownership subsidies is that it helps reduce income equality, but empirical evidence suggests that the rich gain substantially more from them than the middle class, this justifies doing away with deductions and favorable interest rates from fannie and freddie altogether in the authors' eyes. They offer the fig leaf of extending assistance to renters, which would of course simply put more money into the pockets of landlords. Historically, landlords are pretty much the aggregate epitome of evil, some may be decent, but most simply exploit their tenents. America, with its wide open spaces was diluting the power of landlords, especially after the homestead act was passed and again after WWII when suburbs made modest houses attainable for the working class. Government was instrumental in empowering people to own their own houses and farms at the expense of landlords. Of course, without regulation this would simply transfer the exploitation from landlord to bank.

So, eliminating all these "subsidies" will, fix all that ails us, cut $700 billion in wasteful spending and wrench the dream of having your own castle from lots and lots of people. In their words, "reforming the American housing finance system will improve the budget and stimulate growth and will make a real contribution to our future prosperity." Supposedly steering investment from homes to "areas of the economy that offer higher rates of return, like human capital, infrastructure projects and capital business projects in other industries" will make everything better. Riiight. I guess if you crush people's expectations of meaningful work and getting ahead, while condemming them to tenements, that will unleash a flood of investments in productive capacity. Why not, it's worked so well in the past.

This article smells of throwing the baby out with the bathwater and really shows how much the intellectual "business school" side of academia has been retarded in the age of austerity and perpetual recession. Just like pitting workers against each other, sacrificing social insurance programs we've paid into our whole lives, cutting education committments at all levels in favor of imperial domination, and privatizing military functions at incredible expense to maintain that empire, elite opinion advocates nothing less than eating our seed corn and ensuring our continued decline. Houses stopped being safe with the bursting of the bubble, now our imperial citadel is sinking in the shifting sands of a devestated peasantry, all for the benefit of a tiny minority of the obscenely wealthy. That this kind of milquetoasty tyrannical prescription came from academics and not mouth-breathing teabaggers in the NYTimes and not fox news, gives a pretty good indication of what's in store for the future of our fading republic.