Scrivener.net

Friday, August 08, 2008

Uncle Podger Congress creates a "housing bill".


[The above true story via Bok]

As home prices slump, Congress moves smartly into action to help homeowners and the depressed housing market -- pausing only to...

[] Firstly, bail out two big privately owned for-profit corporations operating with government subsidies ... while assuring they keep paying dividends ... and imposing a new tax on them while they are subsidized ... to finance creation of new low cost housing.

As former Federal Reserve governor Lawrence Lindsey writes
Congress rejected a proposal that Fannie and Freddie be barred from paying dividends if they are receiving injections of capital from the federal government. This idea would seem to be the first lesson in a course on Government Bailout 101. The government shouldn't be shoveling taxpayer money in the front door while the company is shoveling dividends to shareholders out the back door.

Freddie Mac paid $1.6 billion in dividends last year while Fannie Mae paid $2.5 billion. Both have dividend yields that are many times higher than the norm. Congress chose to protect the shareholders at the expense of the taxpayer...

... the legislation included a special tax on mortgages originated by Fannie and Freddie to go into a fund for "affordable housing" run by politicians and community activists. It may seem natural for politicians to help out their colleagues and the people who turn out the votes on election day with newly dedicated taxes. But whatever logic there is in boosting taxes on entities that need public funds escapes me...
Yes. And beyond that, one might also question the logic of doing so to fix a housing glut that's causing a depression in home prices by subsidizing more new below-market-cost housing ... but hey, as long as the subsidy is coming from a tax on private corporations receiving a government bailout so they can keep paying dividends, what's to complain about?

[] And secondly -- following its rule that "no bill shall be passed unladen with gifts of pork such as to be found under a hog farm's Christmas tree" -- to attach gifts to the deserving such as ... oh ... the auto industry....
"...a provision tailored narrowly for Chrysler to ensure that it can benefit from a corporate tax incentive even though the company is now structured as a partnership not a corporation. The bill does not name Chrysler but rather describes an unnamed automobile manufacturer “that will produce in excess of 675,000 automobiles” between Jan. 1 and June 30, 2008. [NYT]
... and a Canadian railroad car company, for Gulf coast hurricane relief, for a plant it is building in Alabama, that is 300 miles away from the Gulf coast....

A tiny provision buried in the bill adds Colbert County in northern Alabama to the Gulf Opportunity Zone, a region that gets federal benefits to help with hurricane recovery.

The provision will let National Steel Car of Canada get hundreds of millions of dollars in tax-exempt financing for a plant it is already building in the county, which is almost 300 miles from the coast and far from the ravaged areas...

Alabama legislators, who had promised the Canadian company it could get state or local financing if the federal subsidy fell through, got it included in the bill. [SFG]

Hey, I just can't wait for the politicians who deliver this kind of "housing bill" to deliver their bill for nationalized health care!