Huzzah!

From the standpoint of Wall Streeters and their enablers, free market fundamentalism means "Heads, I win; tails, I win, too!"

Your right, the credit is a bad idea. But this is not an idea pushed by free markerters, this is pushed by statists trying to hold up the housing market.

I wouldn't have a problem with the credit if they made it nonrefundable. I think it's great when those who owe 70K in taxes can reduce their tax burden to 62K.

But as it stands, this "credit" is a give away. Another example of people getting free cash from the government.

Club for Growth, The Chamber of Commerce and the national Republican Party? Socialist outfits looking to make sure everything is redistributed upward to needy oligarchs. Of course centrist Democrats have signed on to the program too...if you can't beat them make sure you get your share of the bribe money being passed around.

I have always thought of the 'free market' as some sort of perpetual motion machine as impossible to make work at all as an engine of an economic system as it is as a contruct in a physical system.

The point of either invention is that it will work, forever, at optimum efficiency without human intervention.

Look Dean and all,

I will concede that the tax credit is silly. But you all are missing the point. This is not a crisis in the housing market, but a crisis in the idea of housing.

The reason home ownership exists is so that ordinary people can believe they've got a measure of stability and prosperity in a high-risk world. Let's admit this up front: the housing=stability meme is what Ibsen would have called a life-lie, but it's a pretty decent one as these things go, and in general we all support the housing=stability life-lie with things like the mortgage interest tax credit, neighborhood events, gardening competitions and the like. It's nice. It's good. It makes families feel more stable.

(To people who are big rental fans I say go out and get your own delusions of stability and leave the rest of us to ours.)

When the Financerati decided to play fast and loose with the housing-is-stability delusion, they opened a can of worms. Never mind whose "fault" it was, the buyers or the banks, the real estate crisis has pointed out to every homeowner in America that THERE IS NO FLOOR TO THE HOUSING MARKET. And there's nothing like looking down to get people nervous about being on the high wire. (To those who maintain that housing prices need to "come down" is zero, with almost nobody qualified to buy anyway, what you had in mind?) A social contract is being busted up here, and it needs to be repaired.

Sure, people who are buying houses are happy to take the tax credit, which is intended to shore up the social contract and make people believe that housing is "safe" again. (In desperate times, of course people will take money.) But people aren't dumb. Everybody knows that as long as the foreclosure machine is running, there's a real possibility that the only direction for ordinary people is down.

I have been saying this since 2006: the only way to end the housing crisis, and the economic crisis that sprang from it, is through principal reduction. Anybody with a yearly income of less than, say, $300k per year who purchased a home (or perhaps even an income property) during the bubble years should be handed a no-questions-asked, no-credit-hit, refinance of their home at its CURRENT VALUE, at a low, fixed rate. End of crisis.

(It's too bad we didn't do this a couple of years ago when all the cheap neighborhoods tanked. It would have been a lot less expensive.)

The fact that banks have not requested this fix and the government has not offered it, tells you everything you need to know about who is running the country and how concerned they are about the middle class. When the banks own enough housing, they will just figure out a way to "rent" it to people, hold a lot of it off the market in the guise of careful underwriting, and drive prices back up that way.

For those of you about to throw a fit about principal reduction and the "greedy" homeowners who bought homes they couldn't afford, please read any book about how human beings will gang up and persecute each other about stupid, meaningless things (Lord of the Flies, The Scarlet Letter, The Human Stain, etc.) and get over it. This is not about the guy who bought the investment property, or the guy who got the house with three bathrooms. It's about where the nation's money ends up--and I'd like to see a little more of it in the hands of people like you and me, thanks very much.

So Dean, please, less about the tax credit, and more about restoring public confidence in housing, even if you are one of the "smart guys" who knows that housing isn't the safety net we like to believe it is.

Sorry about the rant, but this is as plain as the noses on our faces. The subprime foreclosures are almost over, and the veil will be lifted as the extravaganza gets really ramped up in "ordinary" neighborhoods all over the country. I just hope the realization won't come too late.

Auto dealers, realtors and home builders are big contributors to candidates of both parties.

The free market is not the basis of the US economy. The US economy is based on the making of deals. This is true for most significant transactions, even when politics is not involved. A typical deal would be Intel's deals with PC manufactures to use Intel processors exclusively in return for a large discount.

The free market of classical economics only applies to a few things like soybeans. Even there, the existence of large, private buyers like Cargill and Bunge makes the market questionable.

THE GREED FOR HIGHER INTEREST RATES KILLED OUR ECONOMY

Home price $300,000 X 2% $500.00 per month interest
Home price $300,000 X 4% = 12, 000 or 1,000 per month interest

Home price $150,000 X 5.4% 8100 /12 = 675.00 per month interest

If only we had done this earlier? Why couldn’t the people have gone to the Fed window, like the Goldman boys or JP Morgan, and had gotten the same sweetheart deal of near Zero % for the money?

So instead of a price support for real estate, the Gov allowed values to drop precipitously. Now all properties are caught up in the destruction.

Allowing the people to have paid interest payments during this downturn for a temporary time, would have gone a long way to let the market recover.

Now wouldn’t that have been better than kicking people to the streets, driving people into foreclosure and then flooding the market with all these foreclosed homes, further driving down the value of all other homes?

Because of the greed, for higher interest rates the whole system collapsed, yet no one wants to give up making money, there’s no profit in being charitable.

So while Goldman and JP Morgan go to their friends at the Fed to get 0% loans, to keep afloat, they do not need to serve or meet the needs of a customer base to keep viable, the government will give them the money.

Where was Social Security? As in Social needs.
Oh that’s right the Government spent the money on other things. Unrelated to Social Safety net.

Tax base destroyed, consumer confidence down, loss of jobs; all because the middle class, who placed their equity in homes, was wiped out, because our Government wouldn’t do the right thing for the peasant class.

The banker class destroyed the Goose that laid the Golden eggs.
When the goose was on life support they let the goose die.

Dean,

I agree with your position that generally the right-wing favors massive government intervention to protect and enrich the wealthy while imposing "market forces" on everyone else, but is the first-time homebuyer's tax credit really an example of this? I understand the new credit that will be given to longtime homeowners probably qualifies as corporate welfare, but the first-time homebuyer's credit has also helped a lot of low-income families buy their first home. I don't see anything wrong with this, even though it does also help realtors, builders and bankers. I realize it would be better to have an $8,000 tax credit given to everyone below a certain income even if they can't afford to buy a house, but sometimes its nice to think about reality. The first-time homebuyer's tax credit is probably doing a lot of good for a lot of low-income people who need it. Am I completely wrong here?