Wednesday, August 14, 2013

On subsidizing debt...................

In a post, surely designed to win the hearts and minds of the real estate industry, David Merkel wonders why the federal government, via Fannie Mae and Freddie Mac, should subsidize long-term debt:

"30-year mortgages allow some to buy houses that they should not buy.  If you have to have a 30-year mortgage instead of a 15-year mortgage, you are buying too much house for your income.  We spend too much money as a society on housing, and we take on too much debt as a result, leading to fragile financial systems.  Debt-based systems are fragile relative to equity-based systems."

Didn't seem like much of an issue back in the days when real estate values always went up.

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