On Wednesday, the House Oversight and Government Reform Committee held a hearing on the granting of nearly $13 million in bonuses for executives of Fannie Mae and Freddie Mac. The day before, all but four member of the House Financial Services Committee voted to strip these bonuses for the failed government-sponsored enterprises and subject them to the federal payscale. (Horror of horrors, the Fannie executives wouldn’t be able to make more than the vice president’s salary of $230,000!)
But when it comes to aiding millionaires, Americans should be doubly outraged at Fannie and Freddie and at their enablers in Congress. Some of the very same members of Congress expressing outrage about the bonuses were the chief cheerleaders for a provision that would enlarge the government’s role in the housing market and at the same time increase government subsidies to millionaire owners of McMansions.
As I wrote in National Review last month, the Democrat-controlled Senate and a handful of Republicans voted to hike the conforming loan limit for mortgages that Fannie and Freddie can buy and the Federal Housing Administration can insure to $729,750. And on Thursday, the U.S. House of Representatives approved a “minibus” appropriations bill that increased these limits for the FHA.
In the National Review article I wrote, “If this increased loan limit becomes law, it would mean that purchasers of these expensive homes — millionaires and near-millionaires almost by definition — could save thousands of dollars from below-market interest rates thanks to government guarantees.”
Although there were fiscally conservative members of the House, such as Rep. Scott Garrett, R-N.J., who fought against this proposed welfare for the rich, the House unfortunately decided to go along with these McMansion subsidies.
As a Wall Street Journal editorial page noted, “While cable TV is chasing the trivia of Fannie and Freddie bonuses, the real news is that late Monday a bipartisan Congressional committee announced an agreement to increase FHA’s maximum mortgage limits to $729,750 from $625,500 through Dec. 31, 2013.”
Ironically, the same Democrats who rail against tax cuts for “the 1 percent” fellow Democrats — as well as self-proclaimed socialist Sen. Bernie Sanders — voted unanimously in the Senate to protect subsidies for millionaires’ mortgages. Sen. Bob Menendez, D-N.J., who chastised Republicans as “not interested in asking millionaires and billionaires to pay a half a penny on the dollar for the sake of the future of our children and communities” was the chief champion for government backing of mortgages for McMansions.
Menendez proclaimed that Congress must raise the limit back to almost three-quarters of a million dollars in order to save the “middle class.”
Not raising the limit “makes it harder for middle class homebuyers to get credit when credit is tight,” Menendez told Reuters. But this definition of middle class is pretty, shall we say, rich. As a Wall Street Journal editorial noted, “the average sales price for existing homes in September was $212,700.” And even in Menendez’s home state of New Jersey, the median sale price of homes was only $303,100 in August, as calculated by Zillow.com, a prominent real-estate website. This amount is less than half of the $729,750 limit Menendez and the other Democrats said was necessary to protect the “middle class.”
When President Obama likely signs this bill, it will mean that purchasers of these expensive homes — millionaires and near-millionaires almost by definition — could save thousands of dollars from below-market interest rates thanks to government guarantees. And taxpayers will once again be on the hook, as Fannie, Freddie, and the FHA still have not reformed their reckless ways that led to the financial crisis.
Yet so far, there have been few if any condemnations of this government privilege for the wealthy from groups involved in the supposedly populist Occupy Wall Street.
And this — as well as the movement’s general silence on the government-sponsored enterprises Fannie and Freddie’s outsized role in the financial crisis — exposes the stink of hypocrisy (on top of the many other reported scents) from much of the movement and its allies.
CEI had signed a coalition letter with groups such as Americans for Prosperity and Americans for Tax Reform and housing scholars such as Peter Wallison and Edward Pinto of the American Enterprise Institute calling on Congress to oppose raising the loan limits in the looming “minibus” appropriations bill.
The 99 percent, or at least the 53 percent who pay federal income taxes, should definitely make their voices heard.
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