When Congress decided to extend unemployment benefits for Americans thrown out of work by the financial crisis caused by the combination of housing bubble, easy credit for homebuyers, and easy speculative profits for Big Banks (based on all of the above, plus the ability to delude themselves into thinking that all risk had been hedged away with derivatives like credit default swaps with AIG), Congress couldn't just do what was needed and stop there. The unemployment benefits would have cost about $2 billion. INstead, Congress passed another bill larded with corporate welfare (extending the NOL five-year carryback so that even huge multinational corporations can get more bailout money from Uncle Sam) and homebuyer tax giveaways (providing a bailout for some homesellers, some banks (more MLs to process, more fees to earn--and even including people who already own homes in the group eligible for the taxpayer assistance in buying another home) and some home builders (sales of some of that too-high-priced inventory)). For more on the homebuyer credit, see IR-2009-18 (Nov. 24, 2009) and this YouTube video. Those two tax giveaways--bailouts for Big Business and bailouts for the Real Estate Business--cost a lot more than the $2 billion for unemployed workers and suggest that Congress's priorities have little to do with ordinary Americans.
Robert Pozen (Harvard) suggests the new homebuyer refundable tax credit could bankrupt the FHA and add to the damage to the weak housing makret. Why--because it increases the pool of people eligible (wealthier people qualify); the housing eligible (not just first purchase); the timing for the availability of the credit (through mid-2010) and the FHA mortgages that are insured could be funded by a down payment consisting solely of the tax credit. As Pozen says in the Wall STreet Journal article, "buyers with no skin in the game are more likely than others to default on their mortgages when the value of their home falls below their mortgage balance."
Recent Comments