Comments for Arithmetic and the Fannie/Freddie Fix at http://www.cepr.net , comment 1 to 4 out of 4 comments http://www.cepr.net Tue, 18 Jun 2013 00:44:46 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/cepr-blog/arithmetic-and-the-fanniefreddie-fix#comment-6900 You note that under the hybrid system, home buyers (typically young families) would pay more for the house. But that means that the sellers, typically members of Generation Greed -- the most affluent (except for top executives) and entitled in U.S. history would get more. A total of $15,600 more in your example, at the next generation's expense. And the cost of all the Fannie and Freddie defaults is being paid for with borrowed money, which means younger generations will get stuck with that bill, too. It's all about wealth transfer, as Generation Greed pillages what is left of our public and private institutions. - Larry Littlefield Mon, 14 Feb 2011 04:53:29 +0100 http://www.cepr.net/index.php/blogs/cepr-blog/arithmetic-and-the-fanniefreddie-fix#comment-6865 One thing about the private model is that it lowers local and state revenues raised by property taxes. To the extent that it's politically difficult to raise property taxes, the hybrid model would seem to make local and state budget cuts less likely. Don't know how that effect stacks up against the costs of the hybrid model, however. - Mike the Mad Biologist Fri, 11 Feb 2011 06:44:21 +0100 http://www.cepr.net/index.php/blogs/cepr-blog/arithmetic-and-the-fanniefreddie-fix#comment-6863 "Why should the government subsidize private investors who take on no risk?" Why indeed? Unless there has been total systemic capture by the banks. They own the nuts of the US. - LHS Fri, 11 Feb 2011 06:09:01 +0100 http://www.cepr.net/index.php/blogs/cepr-blog/arithmetic-and-the-fanniefreddie-fix#comment-6848 I agree with your conclusion, but have a couple of issues. First, property taxes are zero sum with respect to homeowners and their local governments. If homeowners pay less taxes in the private system then local governments will be forced to raise tax rates in order to maintain the same level of public services. Secondly, I would argue that investment brings forth its own savings, spending equals income, and growth is path dependent. So if higher home prices do motivate more spending and increase demand then that is a good thing -- even in the long run. The real problem is that homeownership subsidies tend to just raise the price of homes, negating the effect of the subsidy in the first place. Higher home prices help some and hurt others, but do not provide a real net benefit to homeowners. If anything, I would prefer a direct subsidy like the first-time homeowner's tax break. That approach seems more progressive than an interest rate subsidy, which benefits wealthier homeowners who take out larger loans. In addition, the net beneficiaries of interest rate subsidies are the banks and investors who get the chance to own risk-free paper with premium yields relative to treasuries. Why should the government subsidize private investors who take on no risk? - ds Thu, 10 Feb 2011 22:25:12 +0100