Two very important events took place this week. One in Cairo, Egypt and the other in Washington, DC. The lesson of Egypt is simple. Democracy must arise from the people who are being governed (or suppressed, if you prefer) It cannot be imposed by an outside government no matter how much capital is expended. I heard it quoted over and over during the run up of Mubarak's departure, that the Egyptian Army received $1.3 billion dollars in aid from the U.S. annually. I looked up what the U.S. is currently spending supporting the invasions into Iraq and Afghanistan. It is $2 billion a week, plus countless lives. Additionally, and as a footnote, the insurrection in Cairo lasted approximately 18 days. Our military interventions in the Middle East are in their second decade. Lesson learned? Probably not.
Secondly, and with more direct impact on the lives of middle Americans in the future, was the Obama administration's long anticipated announcement that they were recommending the curtailing and eventual elimination of governmental support for both Fannie Mae and Freddie Mac. Since this is ostensibly a blog dedicated to progressive real estate matters, you would think that this would have been met with a howl from the left. To my ear, there is hardly even been a whine. This popular government support dates back to the (first) Great Depression and has helped, literally millions, of Americans to purchase homes. By working with private lenders, repurchasing 30 year mortgages and resupplying capital to the banks to lend again, these popular (until recently) programs allowed the government to backstop loans to private citizens by insuring or or guaranteeing the lender's investment. In their place, the administration is suggesting an influx of private capital and getting the government out of the business of financial lending to homeowners.
What does this mean, really? It means borrowing money for a home will become more expensive and hence will preclude those who have less than pristine FICO scores and or a questionable source of income will not receive loans...For two generations the U.S. government actively encouraged home ownership, it now looks as if that commitment is winding down and the policy will shift towards budget reduction and investment ownership. More on this to come.
