Treasury’s new job: “Protect home values”
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The bailout bill hurtling toward passage tonight in the Senate orders the Treasury Secretary to use his new powers in a manner that ‘protects home values.’
Think about this for a second: We are somewhere on the back side of a historic and damaging housing bubble, and although housing prices are falling, numerous measurements show that housing in large parts of the country remains overpriced relative to income levels. The Congress is tonight ordering the Treasury Secretary to keep the air in what’s left of the housing bubble.
Here’s the language in the bill:
The purposes of this Act are...(1) To immediately provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States; and(2) to ensure that such authority and such facilities are used in a manner that -- (A) protects home values, college funds, retirement accounts, and life savings; (B) preserves homeownership...
Two cents: There is a glut of unsold housing in America tonight. In a normal market, excess supply causes prices to fall until supply and demand are in balance, at which point prices stabilize. Congress, however has other ideas: it wants to keep prices from falling.
Of course it won’t work -- the government is big, but it is not big enough to blow air back into a collapsing asset bubble the size of the American housing market. It is foolish to try, and idiotic of Congress to endorse that effort.
-- Peter Viles
Your thoughts? Comments? E-mail story tips to Peter Viles
Photo Credit: Getty Images