Federal Housing Bailout Punishes New Homebuyers

How do you make an omelet without breaking an egg?

United States Federal Government Treasury Secretary Henry Paulson and others continue to talk in circles about how their bailout is not a bailout and about how they will influence the housing market without influencing the housing market.

"The whole idea in the initiative ... is to make sure as many can be saved as possible without disrupting the market," [Office of Federal Housing Enterprise Oversight (OFHEO) Director] James Lockhart told Reuters on the sidelines of a conference in New York" (Reuters).

The other side of the coin:
Treasury, Fed, OFHEO, etc. throw new homebuyers to the wolves.

The "rescuers" (bailouters) try to obscure the fact that any bailout usually harms someone else because what is good for owners/sellers is generally bad for buyers:

• More bailouts = less inventory for sale (supply/demand) = consumers/homebuyers pay higher prices.
• More bailouts = higher "comps" (comparable prices in the neighborhood) = consumers/homebuyers pay higher prices.
• More bailouts = moral hazard = more risky borrowers enter the market to bid against you = consumers/homebuyers pay higher prices.
• More bailouts = propped-up housing bubble prices = propped-up property tax bubble = consumers/homebuyers/taxpayers pay higher prices/taxes.

Bailouts keep housing unaffordable for you or your children.

You could try to believe that the government can make an omelet without breaking an egg--although its track record is to break a dozen eggs without producing the promised omelet at all.

Please pay at the register anyway--and don't forget to leave Paulson a tip.