Editorial: Obama’s cash for condos

Administration pushes another risky bailout scheme for homeowners

The Washington Times

Though Fannie Mae and Freddie Mac sparked the housing collapse that crippled the economy, President Obama now wants them to play an even greater role. The president on Wednesday announced his “blueprint for an America built to last,” which would have the government-backed mortgage giants underwrite more loans. “We need to do everything in our power to repair the damage and make responsible families whole again – everything we can,” Mr. Obama said.

The basic idea is that the government would use its dominance in the mortgage market to subsidize people trading in an old home loan for a new one with a lower interest rate. As part of the deal, taxpayers would provide a $3,000 subsidy. Borrowers would end up making roughly the same payment each month, and the savings from the lower rate would be used to pay down the loan principal. This scheme bears more than a passing resemblance to the “cash for clunkers” program that handed people between $3,500 and $4,500 for trading in an old automobile for a new, more efficient one…

…True to his redistributionist form, Mr. Obama pledges to pay for this giveaway with a $10 billion tax on “the largest financial institutions.” This means the same banks lending out money for these mortgages with one hand will end up charging more for their services with the other. Such class-warfare rhetoric might appeal to his base during election season, but it makes for lousy public policy…

The complete editorial is at The Washington Times.

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