Reefer Madness and Subsidy Madness

Gary North reports:

The government almost always intervenes on behalf of the suppliers, not on behalf of the consumers. So it is in this case. The justification has been that there must be orderly markets for homes. This means keeping sale prices higher than the free market would produce.

Let's not kid ourselves. This bailout is a subsidy to the suppliers of homes. It is a subsidy to the few surviving homebuilders, to people who own homes, and to people who may want to sell their home to buy an even bigger home later on.

This is an assault on home buyers. It is an assault on anyone who has saved 20% down payment and who wants to buy a reasonably priced home, so that his monthly payments will total a little more than what he has to pay in rent. He wants to move up from renting to home ownership. But, because about two-thirds of Americans are already home owners, and about half of these are in debt to lenders, and something like 40% of these indebted people in a year will find that they are underwater, the government intervenes in order to bail them out. Homeowners vote as a bloc. Renters tend not to vote as a bloc. Homeowners understand that they need a subsidy to make their investment pay off. Thrifty, future-oriented renters do not understand that this subsidy is what keeps them renting.

You'll want to read the whole article.