The Obama mortgage bailout plan is a subsidy to all the wrong people, a continuance of the economically errant past, and generally expensive and nonsensical.
But I could hold my nose and support it under one big condition. Okay, one big condition and one small condition.
First, it needs to contain an apology. President Obama needs to say that a big part of the reason the housing market in the U.S. is so screwed up is that government has for decades been using housing as a misguided social engineering experiment. There is a lethally romanticized vision of home ownership in this country, one that says that right after flag and country, comes a 2,200 square-foot house with a yard.
It's not true, and it never has been. A house is an asset. Pretending otherwise is a form of childishness that we can no longer afford.
There can be no denying this has been a costly misadventure. Home subsidies have caused a massive misallocation of capital in this country, away from productive investments and into housing and housing-related markets. Money that should go into bridges, manufacturing, startup companies and other assets with longer-run economic value has gone into housing stock. Spending that would have supported companies that build our nation, like
was squandered -- in large part because the government has created incentives to make that happen.
People did what the government-distorted economics of the housing market told them to do, and now they we have a financial mess because of it.
No senior administration official has conceded that is the case. No one has said that a big part of the reason why housing is so messed up in the U.S. is because of misguided governmental meddling in this market. No one has conceded that it is not every American's birthright to be a homeowner.
Instead, we are merrily and expensively reinforcing the idea that housing is crucial, an asset whose price declines we must be protected against, even if those housing price declines are what are required to bring back some semblance of affordability.
So, apologize. Concede that U.S. housing policy has been an expensive mistake. Point out that being a homeowner is not in the Bill of Rights and thereby sacrosanct. Say that being foreclosed upon is an economic act, not a moral one. Let's not make things worse by further perpetuating the dreamy mythology that got us where we are.
But apologizing isn't enough. We need to act now to show any remaining sentient Americans that we are ripping off the housing subsidy Band-aid and ending it here. We should be explaining how Fannie and Freddie will disappear from the housing market over the coming years.
At the same time, we need to hear that we're going to rapidly wind down the absurd deductibility of mortgage interest.
That is the quid pro quo for supporting any housing bailout today.
Sure, banks like
Bank of America
aided and abetted the disaster, but the distorted housing market needs to be understood in the context of years of largely indefensible governmental subsides. Beat up deadbeat bankers too, but by getting government out of housing it will help prevent this from happening again -- and that is what taxpayers should really want to hear.
Dr. Paul Kedrosky is a former highly ranked sell-side technology equity analyst, and he currently runs a technology finance institute at the University of California, San Diego. He is also a venture partner with Ventures West, an institutional venture capital firm with more than $400 million under management. He maintains a widely read blog called
Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Kedrosky cannot provide investment advice or recommendations, he appreciates your feedback;
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