Bloomberg.com has been leading its website all day with another crony capitalist-type piece titled U.S. Housing Industry Stymied by Government. The housing and mortgage industries want more goodies. The article bemoans the tightening of lending standards. The first expert it trots out is one of their favorite statists:
“It’s very important for a robust recovery that we get the right credit standards,” said Joseph Stiglitz, a Nobel-prize winning economist and professor at Columbia University in New York. “Giving out unsupportable mortgages was a disaster, and now the danger is overreacting and making the standards excessively high.”
They even went to the Cato Institute for comments:
“The government is working at cross-purposes,” said Doug Bandow, a senior fellow at the Cato Institute, a libertarian policy-research center in Washington. “There’s been a desperate attempt to reinflate housing by throwing money at the problem. The worst time to tighten lending is after doing that.”
It may be a sign of progress that Bloomberg puts a spokesman it identifies as libertarian as the second person quoted. I actually wonder if Mr. Bandow was quoted in context; he might have been saying that the government is floundering with a ”split personality” behavior, and he might well not approve of D. C.’s role in the whole mess. (Bandow also comments elsewhere in the article.)
One of the unintentionally funny parts of the lengthy article is found here:
“We screen out about 30 percent of the people who call looking for a mortgage, usually because of their credit scores,” said Michael D’Alonzo, president of Creative Mortgage Group in Maple Glen, Pennsylvania, and head of the National Association of Mortgage Brokers in Plano, Texas. “A lot of people don’t even try, because they’ve heard horror stories of how hard it is to get a loan.”
Creative Mortgage Group! How 2005 . . .
The article is an almost unending ad for big government. It quotes Mark Zandi, a well-known economist:
“Some of the government’s efforts to stimulate the housing market have been more successful than others, but it’s hard to imagine what would have happened if it had done nothing,” said Zandi, based in West Chester, Pennsylvania.
It would be hard to make this stuff up if you come from a free-market point of view. What of course is hard to believe is how government helped caused the housing mess in the first place. Maybe the market would have cleared more quickly had it intervened less after the crash? (Note that housing stocks peaked in 2005, and by summer 2007, over a year before the stock market crashed and Fannie and Freddie failed, housing was already in a depression. Any government that really wanted to “help” had lots of time to do so pre-emergency.)
Perhaps the worst thing about this article comes in the concluding paragraph:
“Clearly the market was too easy during the housing boom,” said David Berson, the former chief economist of Fannie Mae who now holds that position for PMI Group Inc. (PMI) in Walnut Creek, California. “It is almost certainly too tight now.”
OK, he’s entitled to his views.
Only, in this lengthy article, one manages to find no actual data that lending standards are indeed too tight. The article just presents “experts” that assert it a lot. I did find a mention that FHA is making mortgages with 3.5% down. Not so tight, it would appear.
No need to vent too much. Everyone knows the sort of opinion one would find at The Daily Capitalist. Housing is as basic a need beyond nutritional sustenance as there is. The free market is well able to provide housing appropriate to people’s ability to afford it given that almost everyone wants a roof over his or her head.
From a market perspective, I wonder just a bit if this article, which has been running as the lead for hours, may signify that housing is in real trouble again. I hope not, but it might not hurt to consider that this article is not a news item and real economic and financial news of interest to investors is happening all the time. Why is Bloomberg pushing it on its readership? It’s just another small sign that, along with such arcana as the outperformance of gold versus copper in the past 3 and 6 months, gradually making me dubious about the strength of the “recovery”.