"Hey, Ben. Looks like another group just showed up, hard hats in hand, to get in line for our exciting fall bailout program. This thing's become a smashing success!"
The first sentences from a weekend call by Treasury Secretary Hank Paulson to his trusty sidekick, Ben Bernanke? Maybe, but if so, Paulson is only referring to the latest in a crazy campaign by all manner of downtrodden groups to have Uncle Sam hold their hands and stuff their wallets -- with your money.
This time, with the top dogs from General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler having been escorted back aboard their Gulfstreams empty-handed, the nation's homebuilders have clambered into the federal soup line. They're taking out full-page newspaper ads pushing for a measly $250 billion to fund their "Fix Housing First" package.
Under their proposal, the government -- a.k.a. you and I -- would treat the still rapidly fading housing market by topically applying:
- A tax credit for homebuyers equal to 10% of the value of the home. The credit would be capped at $22,000, about triple the $7,500 amount that Congress blessed earlier this year. Unlike the old credit, this builder-proposed credit wouldn't be repaid.
- A subsidy on interest rates for conforming loans -- meaning that they meet standards for Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), and the Federal Housing Administration -- to bring mortgage rates to 3% from the current level near 6.2%. The National Association of Homebuilders estimates that this portion of its program would carry about a $143 billion price tag.
Fine, but I have a pair of questions here: First, when will the government spigot tighten? With pet food prices rising almost daily, aren't the loving owners of Floppsy and Phydeaux entitled to some government largess? Or, as a devout fan of football, I'm ringing up more and more of a tab just to attend the games. Shouldn't I be getting a ticket-price buydown, along perhaps with a little public sector transportation and parking vigorish?
Second -- and even more importantly -- isn't the proposal for a public-private mutual back-scratching just the sort of foolishness that got us into this now-global housing mess in the first place? As a former operative of one of the nation's major builders, I'm pulling for a cure for the likes of Toll Brothers (NYSE: TOL) and Lennar (NYSE: LEN). But not if it results in a medical bill that perpetuates the problem and financially hammers you, me, and Phydeaux's folks.
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