From the New York Times (but it could have been from any publication, and I heard it from the lips of commentators before I read it):

"For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods...Without the government covering the risk of default, many lenders would have refused to make the loans.

"Michael S. Barr, a former assistant Treasury secretary, said the federal government’s retrenchment would be painful for many communities. “There’s always going to be a line, and for the person just over it it’s always going to be an arbitrary line. [ ] But there is no entitlement to living in a home that costs $750,000."

    In an economic climate of objective risk taking, the government wouldn't have a hand in it at all. It was the hand of government that created the "arbitrary line" of credit that came from Freddie Mac and Fannie Mae in the first place. There is no entitlement to owning a home, period.

    Well, we both know that isn't a correct statement: there is an entitlement, but there is no Constitutional right, and the entitlement is un-Constitutional.

    A "retrenchment" is precisely what is needed, and it will be painful. If you don't have enough equity to stake against buying a home, any home no matter the size or cost, then you don't objectively deserve to own such a home.

    Maybe in another market on another day the equity you hold would get you what you want. But if that day isn't today, the government can't make it so without trampling on the value of the equity of every other home owner.

    And that does have a "trickle down" effect, except as we've all seen, it's not a trickle, it is a torrent.

© Curtis Edward Clark 2011

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