American Dream, Recurring Nightmare: Mortgage Meddling and Moral Hazard

This is a nightmare we’ve had before
American Dream, Recurring Nightmare: Mortgage Meddling and Moral Hazard

Image Credits: woodleywonderworks

by Dan Sanchez | LewRockwell.com | June 26, 2014


In response to the U.S. government gearing up to go to war in Iraq again, in spite of the disastrous failure of the last war, Justin Raimondo recently tweeted: “American foreign policy is a recurring nightmare.”

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The same, unfortunately, can be said for American economic policy as well. The Obama administration seems intent on making a recurring nightmare out of the Inception-style, artificially-induced “American Dream” of widespread government-supported home ownership.

The Department of Housing and Urban Development (HUD) announced in a press release earlier this month that “Preserving the Dream” was this year’s theme for “National Homeownership Month.” The press release is replete with both the right- and left-wing variants of “American Dream” rhetoric—the “Ownership Society” palaver of the Bush years and the egalitarian pandering of the Clinton era—all to justify continuing the disastrous policy of artificially expanding housing credit to as many people as possible, on the easiest terms possible. In particular, it highlighted its “Blueprint for Access” (BFA) document that it released earlier in the year, “outlining the additional steps the agency is taking to expand access to credit for underserved borrowers.”

This is all in keeping with the policy direction that the Obama administration announced over a year ago through its mouthpiece The Washington Post, in an article titled “Obama administration pushes banks to make home loans to people with weaker credit.”

The Federal Housing Administration (FHA) offers lenders taxpayer-backed insurance against defaults for certain mortgages. However, HUD and the Justice Department have, especially since the housing crash, undertaken investigations of loans that go bad, and have, in addition to other penalties, withheld coverage from lenders if they uncover wrongdoing (the BFA calls these “back-end enforcement actions”).

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