How long until the next housing crisis?

John Stossel explains why that politicians may be too optimistic about the economy:

Obama advisor Larry Summers told my former ABC colleagues that “everyone agrees the recession is over.”

It’s possible. But I doubt it.

Sure, the vast Bush/Obama spending blew some air back into the housing bubble. But politicians’ delusion that they can control the economy does more harm than good. Home prices that by now might have found a sound floor — a foundation for growth — instead float on a sea of subsidies.

The March 15 issue of Forbes summarizes the Fed’s house of cards:

The FHA has a $45 billion cushion to cover $757 billion in home-loan guarantees. This is just one part of the federal government’s investment in housing. Another is the bailout of Fannie Mae and Freddie Mac… a third is the Federal Reserve’s purchase of mortgage securities ($1.25 trillion).

How much will the FHA cost taxpayers? Officially, nothing. FHA officers have told Congress they don’t believe they’ll need a bailout. (Fannie and Freddie said the same.)

CEO Franklin Raines promised, “it is private capital that is at risk, not the taxpayer’s…. We do not receive a nickel of federal money.”

But then, oops, Congress grabbed grabbed $125 billion of your money to bail out Fannie and Freddie. Then congress promised to provide unlimited assistance — scrapping the previous $400 billion promise.

It’s not hard to imagine how the FHA’s finances could deteriorate. The recently extended first-time home buyer credit gives buyers a subsidy of 10% of the home’s purchase price, up to $8,000, in the form of a refundable credit (meaning people too poor to pay income taxes get a check from the government). The FHA allows buyers to put down as little as 3.5%. … In short, the government will pay a family money to move out of a rental and into a home.

Wow. What happened to that sober lending and “responsibility” Obama talks about? And it gets worse. Today, taxpayers insure most (Forbes says 90%) new mortgages. Big lending by Big Government is a recipe for the next crash. And since its not their money, the fools keep making bigger loans.

Congress, the Fed and the Obama Administration are making extraordinary effort to prop up housing. No one seems all that concerned that they are essentially making the same mistakes again. By providing Keynesian-style tax credit to new homebuyers and trying to make credit available to people who really have no business buying a home. What is the definition of insanity again?

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