Like a three ring circus, the housing bill distracts the American taxpayer with shiny baubles. Behind the scenes however, the bill will likely destroy the housing industry and the careers of millions of REALTORS. Yet the moths continue to fly toward the fire, praising the insidious federal policy of giving away down-payments to buyers, forcing banks to write down mortgage principle, and protecting non-paying borrowers. All this , and more, just to set the stage for the big act:
Commission caps for REALTORS. Really.
Haven’t Fannie Mae and Freddie Mac done enough harm already? Remember Barney Frank’s “roll the dice” policy of funding credit-less borrowers? Not any more. Faster than slippery snakes shedding their skin, Fannie Mae and Freddie Mac’s political patrons have shifted the media’s attention towards “evil bankers” whose Vegas junkets on corporate jets were the real cause of the current recession. This is not to say that bankers were asleep at the wheel during the credit boom, but they are taking their lumps in devastated stock prices today.
We should not forget, however, that Congress put up the Big Tent under the name of “Everyone has a Home” and gave out tickets with cheap Greenspan money. Pointing the legislative gun called the Community Reinvestment Act (CRA) at banks, Fannie and Freddie sent the message: Put people in homes.
Let the record speak for itself:
Now the question to be asked is whether the latest chapter in the “give the people cheap housing” money isn’t a cure worse than the disease. Giving out free down payments – the $8000 tax credit – and guaranteeing more mortgages through Fannie Mae and Freddie Mac is not a financial solution – it’s a political cover-up. Congressional leaders are far more unintelligent than ordinarily thought, or far more courageous in their disdain for taxpayers.
Either way, they are openly and brazenly advocating for the total destruction of the housing industry.
Certainly, mortgage cram-downs and down-payment tax credits aren’t smart economics. The first directly damages banks’ balance sheets and weakens their willingness to lend to future borrowers (something we’re supposed to be worried about). The second makes Uncle Sam the largest holder of mortgages in America. Mortgage rates will soar, as bankers demand short-term profits in exchange for the risk of government intervention. Fannie Mae mortgages will be meaningless papers that Congress can “waive” for the cameras, unsellable on a secondary market afraid of a Congress that changes contracts whenever it’s politically expedient.
Then there’s this little thing called “inflation” which is likely to occur, as sellers arbitrarily raise their offering price by the exact same amount that buyers have just “received as a gift” from their rich Uncle Sam.
But the real danger is to the real estate brokerage industry. REALTOR praise for this plan is like buying enough popcorn just to get to intermission: It’s the second-half of the show where things really happen. And yet the REALTORS sit dutifully in the stands cheering the clowns.
Somehow the industry isn’t making the connection between the government’s caps on commissions in the financial industry (called bonuses) which comes attached to public money and the real estate industry, who earns a living on commissions. Once Fannie and Freddie become the lenders of first resort, every REALTOR will be receiving government money in every deal. And just like the financial industry, REALTORS will have to take the strings that come along with selling homes on government strings.
If Congress can force bankers to take a salary cut because receives taxpayer dollars, why not force REALTORS to take a commission cut when a government mortgage is involved?
It’s the logical next step, and fits perfectly into their plan. All businessmen are evil, if you remember: We’re the lions in the cage at the circus. The consumers don’t t pity because, by default, we’re greedy, don’t you remember? And they get their popcorn for free, from Ringleader Uncle Sam. Congress will simply haul the CEOs of America’s real estate CEOs and leaders, look into the camera, and tell the public that “in these tough times” its the patriotic duty of real estate agents to give up some of their commission to help “the vulnerable homeowners” who risk losing their homes to foreclosure.
So get ready for the end of the housing industry as we have known it. Don’t be too surprised, either: REALTORS have been asking for every sort of protectionism and bail out for a decade. Prevent banks from getting into the business. Set restrictive minimum standards to keep out innovative non-traditional models. Force everyone to play by the union rules, even when they’re not even part of the association. And please, please, Mr Congressman, give us more cheap loans, more free down-payments, more tax breaks for buyers. Pretty soon we’ll have all of that – and all of the strings that come along with it. It will take just one sob-sister to sit before Congress and tell them how she couldn’t sell her home because the REALTOR’s “expensive” commission prevented ordinary people from making an offer and – WHAM! Commission caps will be in the next overnight legislative package faster than you can say “Brother, can you spare a dime?”
Sure we asked for it. But it doesn’t help that Fannie Mae and Freddie Mac really do hate the housing industry.