I Sinned My Way In, I’m Gonna Buy My Way Out

We live in a country where people get elected based on what they promise to their constituents. Good, socially-conscious Democrats must be continually reminding people what the country can do for them.

Wouldn’t it be great, for example, if the government could make sure every American has access to affordable housing. Of course, if we as a country wanted to subsidize housing for the poor we could easily do so directly. The problem is it would cost a fortune and most Americans still aren’t ready to go along with this kind of overt transfer of wealth.

If we’re going to socialize this country we have to do so under the radar. Don’t worry, I have a plan:

We could create a shell organization that would willingly buy up bad debt (that is to say debt extended to people who are statistically likely to default) at a price well above what the market would otherwise pay.  Then we could carry this debt as an asset valued way above what it is actually likely to be worth.  That will make it sound like our subsidization of the housing market isn’t costing the government anything.

Of course this will mean that anyone and everyone will be scrambling to offer loans to people who probably shouldn’t be borrowing since they know they can turn around and sell the asset at inflated rates.  This will mean lots of people who otherwise wouldn’t be able will get to own homes – which you’ll remember was our original goal.

As an added bonus, increased demand for housing will cause housing prices to go up which will make everyone who happens to own any real estate feel like they magically got richer. Socialists can take credit for this and tout the benefits of government intervention in markets. But I haven’t gotten to the best part yet.

Eventually the scheme will start to unravel when these poor credit risks can’t pay their mortgages. Once the market notices this they’ll start to get worried that all the debt floating around isn’t worth nearly as much as everyone is showing on their balance sheets.  The credit market will tighten, which will reduce demand for housing and put downward pressure on housing prices.  This, in turn, will cause mortgage-backed securities to be worthless as people begin to default on their loans.

The drop in securities and real estate prices will make a lot of people suddenly feel less rich. Even though what they’re losing is only the imaginary value we created by manipulating the market, they will all go ballistic as though a tornado had descended from the heavens without warning and destroyed everything they own. There’s nothing better on those democratic heartstrings than a little old lady who lost her retirement savings, or a single mom who can’t pay her mortgage.

Remember, these are our constituents. We have to look out for our jobs. Then comes time to pay the bill for the decades of consumption subsidies we so cleverly kept off the books, and this is the best part. When we show up with a check we can act like we’re coming to the country’s rescue. Where would the markets be without the government to bail them out? They’ll need love us even more.  And as a bonus, if there happens to be a Republican in the White House we can blame the whole thing on his “failed economic policies.”

It’s doubtful they will ask exactly what policies we’re talking about. But whatever they were, the whole mess will be his fault. After all, how could economic consequences ever take more than eight years to come to fruition?…..