I didn't say a single word about the mortgage tax deduction. Not one. Specifically where is the "falicy"? There are simpler ways of saying "I don't know".
They roll into new subsidized 30 year loans, on average. The mortgage market is distorted beyond any reasonably semblance of reality, it should not be a surprise then that home prices did/do as well. Ask yourself this - what did mortgages look like before we went down this path? And what sort of home prices did it support?
It was also First Boston along with Salomon that started securitizing mortgages, more or less simultaneously, in the 80's. This was a major factor leading ultimately to irresponsible lending, because the securitized mortgages were so much more attractive to investors that within a short time far more mortgage money became available for lending. I still don't see why a 30-year is irresponsible, from the viewpoint of the originator, relative to say a 15-year. I think Random.Capital is simply wrong on this point.
I believe you are not appreciating the scope of the distortion. I agree that a 30 year is not that much worse than a 15 year - the problem is that even the 15 year does not exist without the implied taxpayer backstop. Prior to government (taxpayer) intrusion into the mortgage markets, a typical mortgage was along the lines of 60-70% down payment with a 5 year term. 60% down, 5 year term. From that, it's pretty straightforward to work out the implied median home price based on current incomes. The difference between the implied price and the current price is the size of the market distortion - and it is massive.
Yeah, all that, and I would still take Bush as our president over the commie dictator currently occupying the White House. I see you forgot to mention that Obama has spent more tax payer dollars in just eighteen months, then Bush did in his entire eight years. Obama is history in 2012!!!!!! The majority of America has finally woke up, and see what an absolute disaster they put in charge of the country. The economy continues to spiral downward under this clown Obama, but what does he do??? Spends all his time ramming a trillion dollar entitlement (Obamacare) down our throats using the reconciliation process, while letting the economy get worse with each passing day. Oh, but Odumda thought he had all the answers by ramming an $800 billion dollar stimulus bill through. That has worked wonders hasn't it? Not to mention that nearly 60% of the country wants Obamacare repealed!!!!!!!! But this is what America deserves by using the affrimative'blacktion' process to select it's leaders!!!! Enjoy the Socialist States of America!!!!
It helps if you list all the taxpayer backstops. They are: 1 - The Federal Home Loan Banks - provides funding to banks specifically so they can make mortgages. This works so well and is so efficient at its job that most folks barely know it exists. I'm not sure that's a good thing, though, oddly enough. 2 - Fannie and Freddie - more or less keeps the secondary mortgage market alive 3 - The mortgage interest deduction - either the largest or second largest "tax expenditure" out there 4 - The property tax deduction (other local taxes are not deductible against your Federal bill, so that makes this a special subsidy to housing) 5 - The capital gains exclusion on a home sale, which applies as long as you get another house within a certain amount of time from selling the previous one. I don't believe there's any other asset that gets this treatment. I'm sure there are others. It's a long list. The US housing market simply wouldn't exist in its current form without government support, and that's been true since WWII at least.
I can't be sure about this statement because there is the Danish mortgage model that provides transparency and liquidity to the market without government backstop and there has never been a default in 200 years. Three ways Danish mortgage market trumps U.S. http://www.realkreditraadet.dk/Admi...Danish+mortgage+market+trumps+U.S._090610.pdf