Housing Winners and Losers

Big weekend/beginning of the week in housing. Out with Kerry Killinger. In with government “conservatorship” of Fannie and Freddie.

What’s interesting to me is how some of this is being spun in the media as a benefit. The first sentence of the CNN article is “Mortgage applicants rejoice!”, thanks to expectations of falling mortgage rates now that the government will ease some of the credit concerns. Wall Street’s way up this morning. And Ron Sims is twittering (actually, I think the verb form of using twitter is “tweeting”?) about how we should all buy houses now.

Obviously, the celebration of great wins for homebuyers – as well as those people who will have an easier time staying in their home now that the government will have even more incentive not to have them foreclose – ignores the potential huge costs to tax payers of the bailout itself. And the potential market implications for people feeling like they can be riskier again if the government is guaranteeing no matter what (good ol’ moral hazard.)

Not saying that the Treasury shouldn’t have done what it did. Just seems to me a lot more complicated than the initial spin.

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