We also need more relief spending
Imagine if Freddie Mac and Fannie Mae had been taken out of government conservatorship before the coronavirus pandemic. Many housing pundits, including Federal Housing Finance Agency Director Mark Calabria, continue to advocate for this.
If Freddie and Fannie were public in 2019, can you imagine the disruption in the housing market when more than 1,573,000 Freddie and Fannie loans went into forbearance? We can be sure of one thing: After delays, confusion and finger-pointing, Freddie and Fannie would have to be taken back into conservatorship and the government would once again need to come in and provide capital.
We need less ideological-driven leadership at the FHFA. If we learned one thing from the 2008 financial crisis, it is that the U.S. housing market is too important to the overall economy to not have the government’s full support. Only the government has the ability to take the necessary losses, quickly, without disrupting the economic ecosystem.
And we don’t need to raise taxes to help backstop the GSE’s. We just need the GSEs to be managed “for the people” not “for the profit.” The notion of the taxpayer being at risk by keeping these programs within the government’s purview is a political-ideological scam. The government hasn’t and won’t raise your taxes to fund the GSEs.
We are currently being too timid in our response to the forbearance issue. The question is: Do we need different people doing the jobs that already exist or do we need to create a new position to address the many gaping holes in U.S. housing market policy and management?
As much as I hesitate to suggest another layer of bureaucracy, I believe an independent “Housing Czar” could be beneficial, not only in these current times of crisis but also during recovery and eventual growth of the market.
As I envision the position, this independent housing official would function as a consumer, business, state, city and federal government advocate. For example, one job would be to advise homeowners of the pros and cons of the various forbearance plans, including directing forbearance exit strategies that result in reasonable outcomes for all parties. The housing official could also suggest programs to address the upfront deflationary damage we see in the rental markets.
Now more than ever, we need non-political strategizing and planning to help homeowners, renters, landlords, lenders and servicers navigate these treacherous times to find solutions that benefit or at least don’t debilitate all that are involved. It seems so critical to the recovery of the economy as a whole, but it doesn’t seem like anyone is doing this.
We also need more relief spending
For decades I’ve been told that government debt was dangerous for the country because interest rates and inflation would skyrocket, putting our grandchildren into virtual slavery to our debt holder overlords.
The federal debt crisis was one of the longest and most successful cons of my lifetime.
We are now spending trillions on disaster relief with barely a blink of an eye. It seems that large deficits and low tax rates can coexist after all. Look, we are the United States of America. We have the biggest economy in the world, good demographics and the biggest military in the world –– so don’t worry about hyperinflation or running out of dollars.
Even so, I don’t expect we’ve seen the last days of this very successful con. Trust me, it will raise its ugly head again to scare future generations into foregoing their social responsibilities. I admit that I totally embrace the low tax rates and a higher government deficit model as I described in this article last year.
Just so we are clear: Disaster relief spending is not stimulus. Once we flatten the infection curve and lift the stay-at-home measures, we are going to need a real stimulus package to revitalize the economy. We are not going to “get back to normal” (Jan/Feb 2020) without assistance.
A lot of businesses will not come back, so we have to come to grips with this and have a plan for the future. We don’t have many fiscal constraints outside of politics and the embedded inflation fears of Baby Boomers, both of which it would be wise to put aside during this major deflationary event.
In terms of economic stimulus, once we can safely walk the earth again, I would like to see a deficit-financed, national infrastructure plan. This would provide jobs and help fix some of the many broken things around our country. I would also recommend a deficit-financed student loan debt relief program.
We can’t be shy about aiding states, businesses and people. Now is not the time for the tone-deaf moral hazard arguments being made by some people, for example, South Carolina Gov. Nikki Haley, who is telling states they should have “saved for a rainy day.” We lost over 26,500,000 jobs in five weeks. It took us 10 years to gain 22,000,000 plus in jobs.
This is one time in our history that we need to launch the nuclear weapons of fiscal and monetary policies to make right all that has gone wrong for business, states and people. The $9 trillion we have dedicated to this thus far isn’t enough when we are dealing with a virus that shut down an economy.
Source: Housingwire
