As I write these lines Congress is taking it upon itself to give away my money. It is doing so cynically and under the guise of helping out the needy. It is doing so through the insidious instrument of a housing bail-out bill. I first warned about this possibility back in April 2007, in an article titled A Subprime Bail-Out? Hell No! However, Congress is coming out with a resounding "Hell, Yeah!" and the President announced that he will sign the bill. What am I upset about? Here is a brief summary.
During the housing boom, me and millions like me sat on the sidelines. We all saw what was going on and knew that a bubble was being inflated. We either could not afford a home because of rising prices or we decided that house prices were so unrealistic that they were getting set-up for a dramatic decline. For whatever reason we did not jump into the market. In my particular case it was a combination of both reasons. Living in the San Francisco Bay Area means that even with two good salaries, buying a decent house (newer than about 50 years old and in an area of town where no drug deals are happening in broad daylight) is a just barely within our grasp, and not without considerable financial risk. We also looked at the price appreciation and judged it to be unsustainable. Congress is rewarding us for our financial prudence and skepticism by taking our money and giving it to the beneficiaries of the housing boom.
Those folks who bought more house than they could afford, who took out ridiculously structured mortgages knowing full well that they were accepting a major economic risk, those who laughed at us for not getting in on the get-rich-quick real-estate scheme - those are the people who are getting our tax Dollars, to assist them as their house of cards comes tumbling down and their exotic mortgages are being foreclosed.
Essentially, Congress in its infinite wisdom, has turned the housing market into a "heads you win, tails I lose" proposition for us lowly renters, who never bought a house. If house prices continued to appreciate do you think Congress would come out with a rescue package for renters whose prospects of getting a house became slimmer? Do you think Congress would ask home owners to share their outlandish real estate profits with those of us who rent? So, home owners got all the returns during the boom and we are getting the downside risk during the bust. This is Washington justice for you, also known as sheer lunacy.
The New York Times published a detailed article covering the specifics of this wealth transfer bill, under the title "Housing Bill Has Something for Nearly Everyone". Read it and you can decide for yourself. My own very strong opinion is that government should stay out of the asset markets with the exception of providing robust regulation.
For you guys out there who will profit from this new housing bill, enjoy my money.