Why not just nationalize the mortgage industry?

OK, so the federal government is bailing out all these companies that played fast and loose with the markets, buying up their bad paper. The government is already in the mortgage business with VA loans and Freddie and Fannie–and now all the crap it’s buying. Why not just nationalize the industry at this point?

What’s the value-add of the mortgage companies, anyway? Deciding who is worthy of the loans, who will pay them back? Hah hah hah! Making accurate appraisals of value? Ho ho ho! Anything else?

There are many virtues to this idea:

*Want to make sure enough loans are being made in poor areas or to minorities? Just do it!

*Want to encourage home ownership? Just do it!

*Want to tighten or loosen the money supply? This is another way.

*Need funds to help balance the budget? To increase cash flow, the government could offer bonuses to those willing to make extra or early payments on their loans.

Home lending is a commodity service anyway, and the only way all these companies saw to “take it to the next level” was to do some really risky shit. If the government were running things, that wouldn’t be an issue. Just make reasonable loans at fair terms to as many people as possible.

I don’t want socialism lite–I want the real thing. Seriously. Capitalism as we know it is about to die, and the question is do we face up to that fact and accept the implications, or do we not. (I am trying to preempt the wingers from crying out here, “That’s socialism!” Fine with me.)

What say ye, Dopers? I am more interested in hearing about the financial reasons why this might not be a good idea than the moral ones. As I said above, I am no free-market fundie.

Yes and Apple and Microsoft too, then they can put out patches for their operating systems that give access to the web cams that are in all these houses so the government can keep an eye on it’s property.

Basically, youve just opted for infinite bankruptcy forever. COngrats. Most people only manage to come up with incredibly bad ideas. You’ve come up with truly disastrous ones.

Okay, so explain specifically why this is such a bad idea. That’s what he’s asking for.

Why not just have the government tell me how much I get paid or where I should live or who I should associate with? It’s simply just much better that way. What does the government know about housing values or real estate markets? Btw, the mortgage process wouldn’t survive without bank credit, so the US government would have to take over the banks as well. That’s a whole lot closer to the Soviet Union that Europe ever was.

To be sure…this is one of the things that got us into this mess. The government doesn’t have unlimited funds to ‘Just do it!’.

Out of curiosity, can you give any examples of a system that is current working under what you are proposing here? Where housing is handled solely by the government? Maybe if you could provide some examples we could compare and contrast, ehe?

You want to put everyone in the US in a house? Do you realize how expensive such a proposition would be? And since the government would essentially own all the houses what incentive would anyone have to maintain them?

Again, could you list an example of someone using this system you are proposing in the real world? It would help to see how it’s done elsewhere so we could get a good idea of the contrast to our existing system…and of the other systems that use something like a quasi-free market approach.

How? Print more?

lol…how would this work exactly? If the government was going to give bonuses that actually were incentives then they would be trading like value, or no one would do it. Explain how you think this would work? Sounds like the usual sort of counter-intuitive ‘logic’ from socialist types, but maybe you have a plan…lets hear it.

Dude…seriously. Let’s just print free money! You are saying you’d make MORE loans with more risk and then saying that if the government did it it would work better. How?? If the government gave loans to everyone (or even just to more people) and they did it on more ‘fair terms’ (presumably with less interest, less closing costs and other associated costs) then how in the name of the gods would they do BETTER than the current fucked up mess??

It’s funny that most ‘socialist’ countries in Europe are actually move in the opposite direction. As are nations like China and India. What is your evidence that ‘Capitalism as we know it is about to die’?

You would need to give more detail than the vague generalities and sharp cries of joy for socialism in order to get a more definitive answer. My general answer would be ‘because it’s fiscally impossible and you are attempting the equivalent of building an economic perpetual motion machine’…though if you want to give more detail you will probably get a more detailed answer as to why your brain child won’t work.

-XT

The very notion that you think this is a good idea (it’s basically happening anyway if the bailout goes through, but that’s another thread) tells me you get more in tax benefits than you pay.

Here’s the basic problem: the Federal Government gets its money from me. Even the money it borrows is borrowed against my taxes. So what you are asking is, “Why doesn’t Chief Pedant want to be in the lending business?”

The answer is: I don’t trust you with my money. I don’t trust you to work hard. I don’t trust you to be responsible. And nearly a century of communism proves me right. It’s easy to be a socialist when the capitalists have built up enough wealth for everyone to be comfortable. Head on down to Cuba and have a gander.

Is Capitalism dying? Too soon to tell. But the Chinese and Russians seem to be taking to it to cure their socialist legacy.

You are aware, no doubt, that even the European right is pushing for a much more socialised finance system. Especially right now. Even Merkel (who has been pushing for greatly increased regulation for years) and Sarkozy are part of that move. Sarkozy’s recent comments on the current disaster are probably the only things I;ve ever liked that he said.

So let’s chat about this move you’re seeing in the opposite direction. I’m really not seeing it at all (Sarkozy’s earlier ‘reforms’ aside)

Except for Unwritten, I’m getting the “I don’t want that, socialism is bad”-type responses. Which are fine but don’t tell me anything.

My idea may well be totally unfeasible. Just as a hypothetical example, it may be that the number of loan officers that would need to be hired or moved over into the federal government is so high, that it would create such chaos that there would be no net benefit.

Arguments like that, about the numbers.

My guess is that it could be done quite easily, however, and that the value add of the mortgage companies is pretty darn low. Once you get your mortgage and set it on autopay, that’s pretty much it. Every month money leaves your account and you get to stay in your house. There are no real customer service issues, and the government is more or less setting the interest rate anyway. A single system for collecting payments, a uniform and fair system for making loans, and a uniform and fair system for foreclosing would seem preferable to what we have now–which, if I need to remind the readers here, has resulted in a cataclysmic economic meltdown.

Nationalizing the mortgage companies would be Un-American. Instead we’re opting for a private/public hybrid where the companies keep their profits when they are successful and the government buys up their debt when they aren’t. It’s like Super-Capitalism.

What the UK government has done a half-and-half: it has split up failed banks into their constituent “good” and “bad” parts.

The good parts (savings and non-toxic investments) get to go play with each other in the free market, while the bad parts (shitty investments and sub-prime mortgages) are being integrated with the UK’s first failed bank (Northern Rock), and run by the administrators who took over, who are under instructions from - and underwritten by - the government.

This makes a lot of sense.

Actually I suspect it could be included in the tax system. The same way student loans are in many countries. You never see the money, have the ability to make early payments without penalty and don’t end up in the current mess. Assuming the government is reasonably responsible about who they give loans to (unlike say, the way banks have been doing it) it should turn into a win/win. Revenue for the state and lower interest for the home-owner. It also deals with getting rid of the shady practices

That’s pretty much how Marx envisioned it – socialist revolution would grow out of fully developed capitalism, such as he saw in Germany and Britain. (Somehow it never worked out that way – socialist revolutions took power only in underdeveloped countries like Russia and China.)