Overall the new fee structure supports higher leverage, which is similar to the Bush ownership society programs which ultimately lead to the housing crash and banking bail out in 2008.
The motivation was the same then as well (more home ownership amongst minorities who were on average worse credit risks).
How do you think this credit bubble will manifest? If the government were to focus on actuarial soundness and credit risk, vs redistribution and racial equity, what might that look mine? Assume they still want to subsidize home ownership via mortgage subsidies.
I know earlier you argued that racial equity was not a motivation, but it has been an explicit goal of this administration (and more broadly) and in other areas where whites are disproportionately negatively impacted there has not been similar redistributive measures. Certainly the Bush plan was an effort to woo Hispanics.
I agree that the fee structure supports higher leverage, there's really no other way to get people with limited inherited wealth or savings into housing. But this need not cause problems with systemic stability. My understanding of the 2008 crisis was that there were people buying and flipping homes expecting quick and certain capital gains, and the funding was plentiful because senior tranches of MBS were treated as safe and had global demand. It wasn't really driven by people with limited wealth buying modest first homes. Regarding racial equity, any policy that benefits people with low wealth will of course reduce racial disparities in homeownership, given huge wealth gaps that exist. But the policy itself is not racial, and low wealth households across the board should benefit. I think this approach is defensible, but should be explicitly acknowledged. I don't think the new fee structure is just a recalibration of risk, though I don't know for sure, and am willing to be persuaded.
Overall the new fee structure supports higher leverage, which is similar to the Bush ownership society programs which ultimately lead to the housing crash and banking bail out in 2008.
The motivation was the same then as well (more home ownership amongst minorities who were on average worse credit risks).
How do you think this credit bubble will manifest? If the government were to focus on actuarial soundness and credit risk, vs redistribution and racial equity, what might that look mine? Assume they still want to subsidize home ownership via mortgage subsidies.
I know earlier you argued that racial equity was not a motivation, but it has been an explicit goal of this administration (and more broadly) and in other areas where whites are disproportionately negatively impacted there has not been similar redistributive measures. Certainly the Bush plan was an effort to woo Hispanics.
I agree that the fee structure supports higher leverage, there's really no other way to get people with limited inherited wealth or savings into housing. But this need not cause problems with systemic stability. My understanding of the 2008 crisis was that there were people buying and flipping homes expecting quick and certain capital gains, and the funding was plentiful because senior tranches of MBS were treated as safe and had global demand. It wasn't really driven by people with limited wealth buying modest first homes. Regarding racial equity, any policy that benefits people with low wealth will of course reduce racial disparities in homeownership, given huge wealth gaps that exist. But the policy itself is not racial, and low wealth households across the board should benefit. I think this approach is defensible, but should be explicitly acknowledged. I don't think the new fee structure is just a recalibration of risk, though I don't know for sure, and am willing to be persuaded.
That’s a good point. Thank you.
Anyone trust this crowd? Me, neither.