The High Cost of Other People Living Beyond Their Means

At least we’ve learned our lesson, and the Fanny/Freddy debacle that caused the economy to collapse in 2008 has been put behind us… Say, what’s that jutting up out of the ocean just ahead?

For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg.

According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, some experts caution, the cost to the taxpayer could hit as much as $1 trillion.

It’s not as if nothing has changed at government-run Fannie and Freddie since the 2008 crash. Now they’re avoiding middle class home-buyers to focus more exclusively on selling homes to those who can’t afford them. In the Obama lexicon, this is known as “spreading the wealth around.”

Every penny flushed down the toilet in the name of “social justice” by Fannie/Freddie will be made up by taxpayers. Otherwise, we might anger the communist Chinese into cutting off the money our rulers have sold America’s future for.

At the crux of the financial crisis, the government took over Fannie and Freddie to avert possible massive losses for banks, money-market funds and, perhaps, most importantly, foreign institutions that purchased billions of Fannie and Freddie debt because of its implied government guarantee.

The Chinese, for example, had invested heavily, and the US decided it didn’t want them to take a loss on their investment.

Others can afford their mortgages, but choose not to pay them:

Nearly one in five delinquent mortgages through the first half of 2009 was owned by someone who could afford to pay, but decided defaulting was a smarter financial play. …

The theory is it’s more financially savvy in the long run to walk away from a devalued home than continue to pay on the mortgage. …

Strategic defaulters gamble that banks won’t come after them because they are too overwhelmed with foreclosures.

The rest of us shoulder the burden as this drives the value of our homes still lower.

Under a government that promotes irresponsibility and parasitism, those who pay their bills are effectively slaves to those who don’t.

Underwater-House.jpg
Yet another underwater mortgage.

On tips from Anonymous Countermoonbat. Cross-posted at Moonbattery.

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