Dear God the Tories Can Be Stupid Sometimes: Cameron Wants A UK Fannie Mae And Freddie Mac
• A new scheme, running to hundreds of millions of pounds, to underwrite a small percentage of mortgages for “new-build” homes. The scheme is designed to reduce the size of a deposit, particularly for first-time buyers, by shifting the “loan-to-value” ratio. Banks are currently demanding deposits of up to 20% of the value of a property from first-time buyers.
If the housing market suffered a severe downturn, the taxpayer could ultimately be responsible for a part of the loss under the scheme. But homebuyers would first lose their deposits and the loss to the taxpayer would be shared with the bank.
This has been tried before. By the Americans: remember them? The people who had the most enormous, gigantic, housing bust just a couple of years back? The one that crippled all the banks? That’s the ones, sure you remember them.
And what did they have in that system? They had Fannie Mae and Freddie Mac which, umm, guaranteed the mortgages for Americans. And FM and FM went bankrupt, didn’t they children, costing the American taxpayer hundreds of billions (yes, that’s a b not an m) of dollars. In fact, costing Americans more than all of the banks put together.
If you were going to look around the world for policies to copy this probably wouldn’t be one high on your list. Hell, we know it’s a bad idea because Willy Hutton proposed it a few years back. Insisted that we must have a Gordon Mac, immediately! What made it so enjoyable was that he made this claim three weeks before the two went bust. And yes, it is indeed true that whatever Willy says we must do is exactly what we must not do.
Still, they don’t call the Tories the Stupid Party for nothing.