The Government Will Pay Your Mortgage!

At least, that’s the best I can decipher from this news:

The Senate Banking Committee will hold a hearing on Thursday to look into the crisis in the subprime section of the U.S. mortgage market, said Chairman Christopher Dodd.

Dodd announced the date of the hearing on Friday, a day after he said the committee would meet next week.

In a statement, the Connecticut Democrat said “predatory lending practices” endangered home ownership for millions of people. “As chairman, I will use all the powers and tools at my disposal to keep families victimized by predatory loans in their homes and ensure that America’s dream of home ownership remains alive,” said Dodd.

Hmm, I think those predatory practices actually enabled millions of people to purchase their homes, evidenced by a 70% home ownership rate in this country. In fact, it enabled too many people to purchase their homes, because it enabled some people to purchase homes they can’t really afford. Nor does Dodd understand the nature of the subprime crisis, because the defaults don’t hurt the millions of homeowners who got a loan they actually CAN afford because of relaxed lending standards, who otherwise wouldn’t be able to purchase a home. Who the crisis hurts are the shareholders of those subprime lenders, the shareholders of Fannie Mae and Freddie Mac, and people who owned homes but used these lending practices to trade up into houses that they can’t afford. The people who didn’t have a house and are defaulting now? They were given a chance to get into home ownership, and now they go back to renting, so minus the credit ding, they’re not that much worse off.

So what exactly is Dodd going to do? Is he going to find a way to take those people who couldn’t afford their homes and give them some sort of money in order so they can keep them? Is Dodd going to use the federal government to pay their mortgages? Or is he going to set up an empty-headed panel that will bring up the subprime CEO’s in order to lambast them publicly, and then not do anything? I’m guessing the latter.

PS – To make it clear, my hope is that the panel won’t do anything. The government has no responsibility to pay for the bad risks these homeowners have taken on.