The subprime saga

May 6, 2008 at 8:20 pm Leave a comment

The New York Times reports a new chapter in the mortgage crisis: Our government is concerned with a bulwark of the mortgage industry, Freddie Mac and Fannie Mae.

What seems like the central issue to this story is the American dream of owning a home. Owning a home means no more dependence on paying rent to a landlord (instead it means dependence on mortgage payments to a bank), and the freedom to own one’s own patch of land (subject to city zoning regulations, property taxes, neighbors with complaints…).

Problem is, by making home ownership a priority — for both the Bush Administration and voices of the left — the government has created two problems. First, it has intruded into the free market — which generally I’m all for, in terms of stopping capitalist excesses, but in this case, the NYT reports, “if Fannie or Freddie fail, taxpayers would probably have to bail them out at a staggering cost.”

Second, home ownership represents another battle in the class struggle. Who wants to pay $200 grand for a house? Who can afford thousand-dollar mortgage payments in addition to car payments, gas-station trips, student-loan bills and health insurance? Yet here our cutthroat capitalism is running up against a sentimentality toward letting everyone, rich or poor, share in the American dream of home ownership. Quoth Congressman Barney Frank (D-MA), who chairs the House Financial Services Committee: “I want these companies to help with affordable housing, to help low-income families get loans and to help clean up this subprime mess … Otherwise, why should they exist?”

Bush has tried to prove that conservatism could be compassionate. The mortgage meltdown, including the woes of Fannie and Freddie, seems a result of trying to test whether capitalism could be compassionate, too.

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