Comments on: Quote of the day

By: Rudy

Rudy — Fri, 19 Sep 2008 23:40:40 +0000

I never could understand Barney Frank when he talks!!

By: Christopher Renner

Christopher Renner — Fri, 19 Sep 2008 16:17:44 +0000

Randy: "In a truly free housing market you would see mostly single wides or double wides in most of the country - in urban as well as rural areas. There's no point in putting 20% down when the same amount will buy the home."

This presupposes that "most" people think nothing of the stigma associated with living in a trailer, or the vulnerability in natural disasters, or the lack of sound insulation(privacy).
Though I'd agree that certain places(e.g. California, New York City) have artificial restrictions on the housing supply which have the effect of pricing out newcomers.

Martin Brock: "Did you read it? This article has Frank saying that FNMA and FHLMC are not Federal obligations. I say he was right. "

It doesn't matter any more that the GSEs were taken off the books in the late '60s/early '70s than it did in the case of Enron, which also had massive underfunding of "independent" partnerships that was successfully concealed for a while.

I seem to remember a few articles from the WSJ in 2002 about the similarities between Enron's situation and the one we've seen this week.

By: BoscoH

BoscoH — Fri, 19 Sep 2008 01:29:04 +0000

@Martin: If you can't see the game Frank has been playing with hearings, I have one last idea for comparison: the way Congress dangles the anti-trust exemption in front of MLB and the NFL to have influence on the way they do business. Every observer for and against Frank agrees that this is what he did. I think he had the best of intentions and the worst sense of cause and effect. He is left heaping blame on others for not being totally in sync with his intentions.

As to the Ron Paul worship... To each his own. He sounds like a whiney 9 year old to me and looks like Marshall Applewhite. I can't get past that.

By: Methinks

Methinks — Thu, 18 Sep 2008 22:16:22 +0000

I think if we allowed the interest rate to be set by the market and no regulation, financial institutions would have never grown to be "too big to fail". Nor would they have swung for the fences because tail risk can get pretty ugly - as we all now know.

Artificially low interest rates create incentive to borrow and regulators increase the barriers to entry for competition. Mix in a few congressional mandates to loosen credit standards to make their constituents happy (home "owners" tend to vote for incumbents, it turns out) and you have giants which are too big to fail taking enormous risks. And why not? If it all goes pear shaped, they'll just go crying to their mama for more candy.

I don't see why 20% down is some kind of magic number.

It doesn't have to be exactly 20%. It can be higher or lower depending on many factors used to assess the borrower's credit worthiness and the risk profile of the asset which is to be purchased with the proceeds of the loan. Just as Mohamed Yunnus discovered a way to profitably lend to the very poor, someone would have found a way to profitably provide mortgages for low income people in the U.S. without government meddling - and much more efficiently than HUD.

By: Martin Brock

Martin Brock — Thu, 18 Sep 2008 18:09:54 +0000

Needless to say, in this context, a higher limit is less compulsory than a lower limit by definition.