Government Intervention’s Next Victim? The FHA and the Next Step in the Destruction of Capitalism

Unbelievable. Here’s another government agency, the FHA, that’s “guaranteeing” loans to people unable to afford them or without the requisite credit ratings, and it’s not government that’s at fault for the looming crisis, but rather the people who take what the agency is offering:

As if they haven’t done enough damage. Thousands of subprime mortgage lenders and brokers — many of them the very sorts of firms that helped create the current financial crisis — are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.

You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country’s swooning economy.

For generations, these loans, backed by the Federal Housing Administration, have offered working-class families a legitimate means to purchase their own homes. But now there’s a severe danger that aggressive lenders and brokers schooled in the rash ways of the subprime industry will overwhelm the FHA with loans for people unlikely to make their payments. Exacerbating matters, FHA officials seem oblivious to what’s happening — or incapable of stopping it. They’re giving mortgage firms licenses to dole out 100 percent-insured loans despite lender records blotted by state sanctions, bankruptcy filings, civil lawsuits, and even criminal convictions.

How does one stop this sort of thing? It’s simple, really: close the FHA. Get government out of the business of guaranteeing loans. Then, nobody has anything to “take advantage of.” That won’t happen, however. Instead, the altruist/collectivist ethics will continue to dominate the discussion (everyone has a “right” to a house, even if they can’t afford it), and those evil capitalist lenders will be blamed–for doing precisely what government is telling them to do, and for doing the only thing one can do to survive in such a mixed economy.

And thus the pattern repeats, precisely as Ayn Rand described it in The Voice of Reason:

One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.

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