ANOTHER THING WE HAVE TO FEAR IS HYPOCRITICAL SELF STYLED TOUGH GUY FREE MARKETEERS AND THE LACKEYS THAT REPRESENT THEM IN WASHINGTON

5/11/10

A friend of mine, who knows me well enough to know that I understand that Fannie, Freddie, and the FHA don’t actually “lend” money (and noted that in his question), sent me an e-mail asking for clarification on my last (or next, depending on one’s perspective) post, THE ONLY THING WE HAVE TO FEAR IS…OUTRIGHT FINANCIAL CALAMITY AND THE END OF THE ECONOMY, AND THE REPUBLIC, AS WE KNOW IT.

My same friend, who is one of my most loyal readers, also knows that I am not given to understatement and so probably anticipated my reply, or something like it. I have reproduced it below for the benefit of my other readers, many of whom probably had the same question as did he.

I wish to thank him profusely for bringing this up and for his, and your, continuing support:


What I'm saying is that no one is making loans on houses (or investing in securities derived from those loans) unless those loans are guaranteed by the government. So, effectively, the only entity genuinely "lending money" on houses, in the sense of taking on any risk, is the government. Without the government guaranteeing the loans, there would be no one lending people money to buy houses. Yet we are told by some “experts” and inveterate bulls that everything is fine, that the financial system is recuperating and sound. But, in reality, without the government holding its hand, the financial system, at least as it relates to residential real estate financing, is still not functioning. The tough guy free marketeers have to rest comfortably in Ma Government’s hands while they go about decrying the dangers of big government and making the big money to which they feel entitled.