Housing industry to join the bailout line
November 25, 2008 by Personal Liberty News Desk
First, it was the financial industry requesting federal funds. Next, automakers said they needed a bailout, too. And now, the housing sector is apparently gearing up to ask the government for a $250 billion rescue package.
House-builders are lobbying for a Fix Housing First stimulus, including a 10 percent tax credit for homebuyers and a federal subsidy to lower mortgage rates, the Wall Street Journal reports.
The sector claims that action is needed to prevent the country from falling into a cycle in which declining home prices negatively affect banks that hold mortgage-backed securities, which in turn depresses the economy further.
However, some critics argue that the plan favors encouraging new home purchase, instead of modifying existing loans held by homeowners.
They raise concerns about the danger of artificially inflating the housing market, creating demand that does not exist.
"The government does not have the tools to rewrite the laws of supply and demand. By artificially increasing prices, we are encouraging more building," Harvard economist Edward Glaeser told the news provider.
It is still uncertain how Capitol Hill would respond to the homebuilder’s request. Congress recently denied funds to automakers, saying that companies needed to present a viable plan before they could receive taxpayers’ money.