Rosenberg: The U.S. Solution to Fighting the Credit Crunch? Take on More Credit

Alternative title: Give Another Bottle of Scotch to the Drunken Sailor

Rosie laying it down:

No wonder we are seeing a housing recovery, and it’s not just about the $8,000 tax credit for first-time buyers.  How does the White House possibly allow this extra goodie to expire in November?  The FHA is picking up where subprime lenders left off: the agency has seen its mortgage business jump 70% in the past year (!) and its market share in just three years has gone from 3.0% to 23% — it is allowing borrowers to finance up to 96.5% of homes priced all the way up to $729,750.  Guess what, the default rate has risen to nearly 7% from 5½% a year ago.  And, it is the taxpayer that is going to be picking up this tab … again!  So, the policy formula here is that after excessive leverage got us into this mess, is to encouraging even more debt and come to think of it, Cash-for-Clunkers did the exact same thing — enticing people who were probably quite content with their jalopy to take on more than $10 billion of new debt.  Amazing.  It’s like giving another bottle of scotch to the drunken sailor, but hey — we can’t have the economy weak going into a mid-term election year now, can we?

1 Comment

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  By Andrea Kay, Thursday, September 3, 2009 @ 10:54 pm

  Rosenberg (“Rosie”) is the man! I always enjoy reading him.

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