Yesterday evening, I stumbled across a news story over at Politico that I had to double-check the date on. It read like something you would have seen in 2006, when sub-prime mortgages were being pushed by the government to increase homeownership for low-income individuals, ultimately leading to the 2008 financial collapse.
But no, it’s from the present day.
Biden’s move to fire the top U.S. mortgage regulator is triggering calls from fellow Democrats to use the agency to expand access to loans for lower-income people, who have struggled to buy homes since the financial crisishttps://t.co/Kv2PnB9x2R
— POLITICO (@politico) July 5, 2021
The problem with this is simple. You can not “expand” access to a loan that a person is not qualified for and not have it lead to financial ruin for everyone involved. Guidelines for credit scores, down payments, and held capital to receive loans exist for a reason, and it’s not because banks want to limit their customer base. Rather, it’s because lending to low-income individuals who have terrible credit and no ability to pay back a loan is asinine. It ensures the low-income individual sinks further into financial despair while the bank is left holding the bag, and in the case of 2008, taxpayers were ultimately put on the hook for ensuring a complete collapse didn’t occur.
Given that, what politician in their right mind would stump for increased access to loans for low-income individuals outside of the already fairly lax restrictions in regards to getting an FHA loan? That’s a good question, and it’s one not likely to be answered with any logical consistency.
Instead, my suspicion is that Democrats think another housing crisis would benefit their political wants. After all, what better way is there to delegitimize the housing market than to cause its collapse, thereby justifying a bigger, more expensive, more powerful government to “solve” the problem?
Yeah, it’s a cynical take, but given the anti-capitalist rhetoric we’ve seen from the far-left that largely controls the Democrat Party these days, does it really feel that off the mark? Would you really put it past the “squad” or even Nancy Pelosi to want to see the fundamentals of private homeownership undermined in order to usher in a big government takeover?
In short, the crisis is probably the point here. Democrats can act as if they care about poor people by pushing bad loans, and then, when everything comes crashing down, they can step in as saviors of those same people, pushing for bailouts and more public housing that can’t “fail.” There’s no real downside here for them, and it’s the only explanation I can come up with for why they’d be stumping to repeat the same mistakes that were made in the early and mid-2000s. If Democrats would like to offer a better one, I’m all ears.