I’ve done lots of things in my life in financial businesses. It’s given me a chance to see a lot of different businesses from different angles.
One thing that surprised me as I learned, was how many places the US Government had lending and insurance programs. Housing, Agriculture, Veterans, Shipping, Exports, Imports, and more.
But the worst of it was that most of it was non-economic. I understand giving small subsidies, but not big ones. Few programs tested the price-sensitivity of borrowers and insurance clients by raising rates until some said, “Ouch! I will do without this insurance.” To me, not doing that is disrespectful to taxpayers, and promotes borrower dependence on the government, leading to too much debt/ cheap insurance.
Thus, I get annoyed by proposals to continue or expand government lending programs, particularly failures like Fannie Mae and Freddie Mac. F&F created the conditions for an oversupply of housing. My view is fold them into Ginnie Mae, and then send Ginnie Mae into runoff. No more new loans. Let the private banks fund new loans. We don’t need more houses at present; past housing policy was a great big fail. The cumulative losses of F&F prove it.
Let the FDIC raise its guarantee fee until some banks decide to do without it. Once that starts to happen, drop it a little, and stay there. If F&F continue to exist, let them raise their guarantee fees until lenders beging to seek other options.
I would much prefer the government exit such businesses, but I am in a minority I suspect. At a minimum, have them behave like market driven firms, or at least like profit-seeking monopolists.
I write this because I don’t believe that borrowers or insureds deserve to be subsidized by our government. Subsidizing businessmen has a bad smell. If they can’t make it on their own, they don’t deserve to make it.