Can Congress Fix The Problems With The Housing Market?

By Joel Persinger
YourRealEstateDude.com

Everywhere I go these days people ask me what I think will happen if Congress passes all the “Fixes” and “Reforms” it is promising in order to “help struggling homeowners” in the current housing crunch. Since so many folks have asked, I thought it might be nice for me to give the question some consideration.

So far, Congress has proposed relief for struggling home owners, a tightening of regulations for mortgage lenders, punishing the lending industry in one form or another, making it more difficult for high risk borrowers to get loans in the first place, saving Freddie & Fannie as was done a week or so ago and so on, and so on. Among the most recent proposals is a plan to bail out those homeowners who can’t pay their mortgages. Of course, nobody seems eager to mention that the money to bail these folks out must come from somewhere. So, who do you think is going to pay for it? It’s not a trick question. The answer is, you. The tax payer is going to pony up the coin for any such deal that becomes law.

I’ve been sitting back quietly watching those in government wrestle with the problems of the housing and lending market for a while now and since I have been asked so often lately about my thoughts on the issue, I have come to three inescapable conclusions:

1. While it could be debated whether the government had any part in getting the housing market into its current troubles, it appears to be an absolute certainty that no-one in the government has the vaguest idea how to fix them.
2. The old political axiom, “When in doubt, grand stand” has never gone out of style. Only in politics can so many supposedly grown men and women madly scurry around in a frantic attempt to look good while actually knowing and accomplishing nothing and still manage to get paid for it.
3. The use of smoke and mirrors is not exclusive to flashy Las Vegas magicians. Government types know that if they keep the public off balance by proposing useless “Fixes” long enough, the market will eventually correct itself. The sad truth is that nobody in government is actually trying to fix anything. They’re just trying to rack up the highest number of “Fixes” so they can take credit for fixing it when it finally gets around to fixing itself. Never in my 50 years of life have I ever seen government actually attempt to fix anything without making things much worse in the process.

So, what are we left with? First, government is not going to fix this. It will fix itself if we just let it. Second, if government actually tries to fix it, it will get worse. Third, the market is supposed to do what it is doing. It spiked upward and needed to correct downward. So, it went down and it will continue to do so until it is done correcting for the spike. Like the old saying goes, “What goes up must come down.” And lastly, there is no painless way out of this. Uncle Sam is not really our long, lost, rich Uncle and he can’t bail us out every time we blow it. Some times we just have to fend for ourselves.