Fresh from signing the largest legislative suicide pact in American history, Obama plans to intrude the Federal government still more into the housing market, amplifying the bad effects of the intrusions that led to the crisis by engaging in still more Federal welfare. According to a story in the International Herald Tribune:
To help distressed homeowners, Obama will create a $75 billion program to subsidize loan modifications that would reduce a family's monthly payment to as little as 31 percent of his or gross monthly income.In short, he plans to reproduce many of the very conditions that led to the crisis in the first place.
A second major component of Obama's plan is aimed at most homeowners who are not behind on their payments, but whose homes may now be worth less than the outstanding amount on their mortgage or no longer worth enough that the homeowners have sufficient equity to qualify for a refinancing. It could also assuage homeowners who angry that seemingly irresponsible neighbors are being rescued.
Obama's plan is aimed at propping up the mortgage market as a whole by having Fannie Mae and Freddie Mac step up their purchases of mortgages and mortgage-backed securities.
To make that possible, the Treasury Department will use its authority under a housing bill passed last year to provide more capital to both companies. The Bush administration had pledged to provide up to $100 billion to each company to keep it solvent. The Obama plan would increase that to $200 billion. The plan would also allow the two mortgage companies to expand the size of their mortgage portfolios.
The plan has three basic components.Every one of these ideas will only make the overall economic situation worse for all but the recipients of this latest round of welfare. That is the key to why Obama wants to do it, and why it's wrong.
One would help homeowners who continue to make their loan payments on time, but are paying high interest rates and would otherwise not be able to refinance because they do not have enough equity or their houses are worth less than they borrowed.
A second would assist people who are at risk of foreclosure by providing incentives to lenders to alter the terms of loans to make them substantially more affordable to struggling homeowners.
The third would try to assure there is plenty of credit available for mortgages by giving $200 billion of additional financial backing to Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies.
One could argue endlessly about how financially unwise this is, pointing out how impractical every one of these provisions is and how they have to result in an even worse housing market overall. Instead, let's cut to the heart of the matter: the idea that some citizens (through the government) should be on the hook to provide housing for others.
Obama clearly thinks so. He has never grown out of his community organizer mentality. The key moral hallmark of that mentality is one that is rarely mentioned in discussions by Left or Right: the willful abrogation of justice. In particular, the indifference to the rights of individuals to choose whether or not to help someone else.
Only a sociopath would enjoy the sight of people having their homes foreclosed. (And, note, half are not even at risk of that. About half under this plan are not even delinquent, but simply unable to qualify for refinancing to a lower rate because of low equity or poor credit.)
But whether those individuals lose their homes or endure higher payments through negligence and excess risk-taking or through simple misfortune, it is not the responsibility of the taxpayers around the country to provide them with a house or cheaper payments. Spreading the wealth always consists of spreading the misery and coercing millions to help the 5% or so who can't make their mortgage payments is simply immoral.
Unfortunately, explicit discussion of moral issues plays little part in public debates these days, even though it animates most of them. Instead, they focus almost exclusively on which route will maximize social utility and an abstraction called "the economy." They too frequently ignore that individuals have their own private economy and that should be the heart of their concerns.
Whenever moral issues do play a part in online debates, they tend to center around the personal motives of Congress and Obama himself. But it doesn't matter whether they are the accumulation of more power, as is likely, or simply a sincere belief that 'the strong' should help 'the weak'. It's irrelevant whether or not he and they are simply soft-hearted, to go along with their soft heads, or are just a bunch of calculating opportunists.
The effects will be the same regardless of their intentions and the first effect is to violate the right of dozens of millions who didn't default on their mortgage payments to choose whether or not to help the others.
That same "we are our brother's keeper at the point of a gun," welfare-advocate mentality is thick in the recently signed, ludicrously named American Recovery and Reinvestment Act. Whether it's billions for the stealth socialized medicine health care provisions, the undoing of mid-1990s welfare reform, $12 billion for retarded school children, or any other, it's clear that the Federal Government intends to put the welfare state on steroids.
The effort represents an enormous injustice against every citizen. The most egregious one is to transfer the freedom to choose from the individual to the Federal Government and thereby violate the most basic principle of justice in society.
That continuing injustice won't be stopped until enough citizens demand a halt to the erosion of liberty.
Those now acquiescing to the Feds' Big Brother acts must come to understand that there is no limitless pot of magic gold coins that appear from nowhere and flow into the Federal Treasury. Every dollar spent on government housing charity comes ultimately out of their wallets. The government has no money of its own.
They will also have to face the truth that to strip their fellow citizens of the power of choice and give it to the government instead is simply wrong.
Finally, they will have to face up to the inescapable end result: that to allow Federal control and injustice free rein, for whatever motives, will ultimately impoverish them all and lead to an end to freedom in America.
Time is running out. The time is now to choose between freedom and justice or ever more of the poverty that always accompanies slavery. Otherwise, before long, it will no longer be a matter of choice.