Wednesday, January 25, 2012

No Tinkering!!!

This article suggests the U.S. Government should offer a "down-payment protection" insurance plan. It wouldn't be an entitlement, people would have to pay for their insurance. But still, I have a Tea Party-ish mentality[1] on this one. Why should the government be in this business? How do we know this is a net good idea without unintended consquences? Government intrusion (Fannie and Freddie) and mis-guided incentives (mortgage tax-credit) are part of what created the problem. WHY OH WHY do we think more meddling is the solution.

The medicine is bitter, no question about it. But as so many economists say of the mistakes Japan made in the last decade--best to get it over with, not try to dilute it and drag things out.

Now if private enterprises want to offer down-payment insurance, and can attract capital to provide it, then that would be just fine. With the proviso, of course, that they are appropriately regulated. Market forces appropriate regulation--then let the "invisible hand" work it out.

[1] Actually, that is just a traditional economic conservative view. But the Tea Party has inherited that mantle.

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