Congress to the rescue?
Will Rogers had a great line about Congress. They’re very good at two things:
1.) Doing nothing and
They’ve certainly done something with the passage of the American Housing Rescue and Foreclosure Prevention Act. The question is: What have they done? The National Association of Home Builders, made up of some of the home channel’s biggest customers, seems very happy with the legislation, (click here) and so do many of the nation’s economists, who sleep much easier now that Fannie Mae and Freddy Mac have a lifeline, if needed.
How much might that cost? Good question. Luckily, the independent Congressional Budget Office looked into it and came up with an estimate.
It will cost somewhere between nothing and $100 billion, or possibly more.
That’s not the kind of laser-sharp analysis that gives me a lot of confidence that Washington insiders know exactly how this legislation is going to affect the housing market.
A straw poll of some of the captains of industry in my Rolodex, gives the clear impression that this industry is generally skeptical of government bailouts
“From my perspective,” wrote Do it Best CEO Bob Taylor via email, “efforts by Congress to craft some type of huge bailout are misguided. So much of this was driven by overzealous speculation, and there should be a cost to the individuals who took those risks.”
In some cases, he added, where fraud or abuse was involved, “some modest assistance for those impacted is warranted.”
Taylor added that the big issue–emphasis on big–today is energy. He recommended all of the following: drilling offshore and in Alaska, easing the permit process for refineries and nuclear plants, exploring alternative fuels and ending U. S. dependence on foreign energy sources.”
One CEO, who spoke on condtition of anonymity, explained that Congressional medicine can often be worse than the illness. “The issue really is the banks’ inability to lend traditional mortgages,” he said.
Kent Porter, vp of Kearney, Mo.- based Porter’s Building Centers, summed up the anti bail-out argument pretty clearly: “If I’m dumb enough to run our company out of business, that’s what I deserve,” he said. “No one will come to our rescue.”
That’s a sentiment that HCN editors have heard expressed many different ways in recent months.
But the American Housing Rescue law will indeed come to the rescue of some borrowers and lenders—including, possibly, some 400,000 homeowners.
In our special section on Orgill, CEO Ron Beal shares some of his thoughts on the topic.
I think foreclosures aren’t the enemy as much as unoccupied houses are the enemy. Empty houses are bad for starts, bad for neighborhood property values and bad for America. (Of course, they’re good for buyers.) If foreclosure laws can be adjusted to allow former homeowners to stay in their homes as renters for a certain period, that could provide relief to industry and families.
Tell us what you think. After all, that’s your Congress spending zero to $100 billion over the next 10 years.