Tuesday, June 26, 2018

"Moral Hazard Comes Back Home”

"Moral Hazard Comes Back Home”
by Tim Knight

"I saw this item in the morning's local paper:
Click image for larger size.

So, just to net it out:
The government has been authorized by citizens to sell bonds;
Taxpayers are on the hook for those bonds as well as the accompanying interest;
The government is turning around and paying for down payments IN BEHALF OF THOSE WHO CANNOT AFFORD THEM;
The fortunate recipients of these gifts do not pay ANYTHING for it; neither principal nor interest is required.
You can be assured that the mortgage on the property (that is, the portion not covered by the free down payment) is provided by another government-backed program, backstopped by the taxpayers of the country, not just California
If and when the house is sold in the future, the county gets its money back, meaning, of course, there is a foundational assumption that real estate in California will never decline in value

I'm speechless. But I will offer up this: if there is ONE thing we have learned from the financial crisis, as well as the recent dismantling of Dodd-Frank and any other final vestiges of rules that were put in place after 2008, it is this: People. Never. Learn. In the meantime, you should seriously ask yourself why you're bothering to work so hard when the people moving in next door got their house funded by everyone else.”

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