Government-Backed Financing

Yesterday, I got involved in a discussion thread that evolved, tangentially, into a disucssion of using gov-backed mortgage money.  To be clear, I feel very strongly AGAINST federal backing of mortgage loans and all manner of its secondary market inclusions.  Here is my most comprehensive statement in that discussion, regarding public funding and backing:

[when asked if I am against every type of fed-backed mortgage product...]

Yes, ANYTHING gov-backed. These programs are invariably rife with waste and peril. Above all else, the government doesn't have anything to loan or with which to BACK a loan. By trying its hand at "fairness" and forcing Sh***y loans through the system for years up through the IMPLOSION (and still today, for that matter), it toys with a major economic component with which it rightly has no business.

 

The fed can set policy to affect bank borrowing rates, and that should be the distance of its reach. for every 'legitimate' gov-backed loan there are five which are inherently stupid, from an objective standpoint. Above all, it remains unprincipled. It was a bad idea (FNMA, for starters) from its origin under fdr's new deal, made worse by Bush1 and Clinton in the 90's, and let off the reservation entirely from that point onward.

 

People stop caring about the ripples so long as they get what they want in the moment. Maybe that's why pseudo-gov entities like FNMA, FHLMC, etc are accepted almost ubiquitously for "liquidity" purposes. Look at the crapstorm we're in and trace it back to its origins, and you will find at the epicenter these beloved, "cryptic-in-the-middle" feel-good institutions kicking the growing problem down the road.

 

Agree?  Disagree? Why?