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I find that most people who use the word "we" or "us" when talking about government actions are not being imprecise. Rather they have internalized the civics cl

I find that most people who use the word "we" or "us" when talking about government actions are not being imprecise. Rather they have internalized the civics class myth that ordinary citizens have a large amount of agency over government. I like to poke at this delusion when I can. I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct. Although I would say the cat's a little out of the bag with regards to preventing government bureaucracies from messing around with mortgage markets.... But my main point was not to make an "ought" argument, but to demonstrate to michaelchurch that if he wanted a particular "ought" outcome (lower housing prices) there are easier ways than to have the government buy 60% of all real estate. If you have even easier ways, that require even less government micromanagement, I'd be intrigued to hear them. In any scenario in which Michael or I actually have enough power to direct the FDIC or government to carry out our madcap plans, the political situation would be so different that many current arguments against FDIC intervention would be obsolete. There might be new arguments against FDIC intervention, that would depend on the specifics of the changed political situation.

philwelch 14y ago
When I say "let's not do X", I don't mean it literally, it's just a way of saying "X is a bad idea". Let's just set aside that entire digression. > I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct. Two points: 1. If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry. 2. The federal government subsidizes mortgages in many ways. Instead of legally regulating mortgages it might be sufficient for the government to just stop doing this. For instance, there are tax incentives for having a mortgage. The government also intervenes directly in the mortgage industry in the form of Freddie Mac and Fannie Mae. When I said "there are so many better dials for the government[1] to turn than resorting to that", those are some of the things I was talking about. [1] Note my use of the third person--are you happy with that or did "let's" derail you from reading the second sentence of my comment?
- bokonist 14y ago
  I agree that if you were trying to lower housing prices you would start by eliminating all the subsidies. There is some chance that eliminating all subsidies would not meet whatever price goal is desired. Housing near employment is going to inevitably be scarce in some cities, and people will inevitably get in bidding wars. If people can take out the maximum mortgage that a high-earning, two income family can afford, then everyone will need two-high earning incomes to keep up (see the book The Two Income Trap). If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry. I think it is most reasonable to have the insurance company be the regulator. This is common in almost all other industries. If you are a landlord, the apartment insurance company will tell you to not allow smoking in the apartment or else it will not insure you or will jack up your rates. If I was czar, I would consolidate the bank regulating functionality which is now spread across a half dozen agencies all into the FDIC. If a bank refused to abide by FDIC regulations it would either face higher premiums or be expelled. If a bank was expelled, all customers would have an opportunity to transfer their deposits to another bank. The executives of the FDIC would be given a comp-plan designed to make them balance the need for expanding credit and the need for overall stability. For instance they could be comped based on overall premiums, but with clawbacks of the last decade of bonuses if the FDIC faces systemic failure and needs a bailout.

philwelch 14y ago

When I say "let's not do X", I don't mean it literally, it's just a way of saying "X is a bad idea". Let's just set aside that entire digression. > I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct. Two points: 1. If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry. 2. The federal government subsidizes mortgages in many ways. Instead of legally regulating mortgages it might be sufficient for the government to just stop doing this. For instance, there are tax incentives for having a mortgage. The government also intervenes directly in the mortgage industry in the form of Freddie Mac and Fannie Mae. When I said "there are so many better dials for the government[1] to turn than resorting to that", those are some of the things I was talking about. [1] Note my use of the third person--are you happy with that or did "let's" derail you from reading the second sentence of my comment?

bokonist 14y ago
I agree that if you were trying to lower housing prices you would start by eliminating all the subsidies. There is some chance that eliminating all subsidies would not meet whatever price goal is desired. Housing near employment is going to inevitably be scarce in some cities, and people will inevitably get in bidding wars. If people can take out the maximum mortgage that a high-earning, two income family can afford, then everyone will need two-high earning incomes to keep up (see the book The Two Income Trap). If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry. I think it is most reasonable to have the insurance company be the regulator. This is common in almost all other industries. If you are a landlord, the apartment insurance company will tell you to not allow smoking in the apartment or else it will not insure you or will jack up your rates. If I was czar, I would consolidate the bank regulating functionality which is now spread across a half dozen agencies all into the FDIC. If a bank refused to abide by FDIC regulations it would either face higher premiums or be expelled. If a bank was expelled, all customers would have an opportunity to transfer their deposits to another bank. The executives of the FDIC would be given a comp-plan designed to make them balance the need for expanding credit and the need for overall stability. For instance they could be comped based on overall premiums, but with clawbacks of the last decade of bonuses if the FDIC faces systemic failure and needs a bailout.