Of course the problem with eliminating the mortgage interest deduction is that unless you made massive tax cuts to compensate in other areas, it would effectively be a two digit percentage tax increase. While this increase has now already been basically necessitated in the long run by the massive recent spending increases, I doubt they’ll collect it this way – two much NAR and NAHB campaign funding at risk (these are two of the top 10 contributing PACs).

Asset bubbles form very nicely without gov’t involvement. Were the feds pushing no-profit, venture-capital funding burning, marginally (being generous) useful, dot-coms in the late 90′s? Lots of tech investment has been great – Intel, Cisco, Apple – but lots of dot-coms easily qualified as “misallocation of capital …, away from productive investments”.

i like the pie chart idea. it could be fun. it could be an interactive chart that we could all vote on and watch the peices (gov’t, lenders, agents, brokers, borrowers, etc) grow or shrink daily, just to see who people really feel should be blamed. and gov’t would have a slice on my pie too. i just don’t believe that, even with their policies that encouraged loose lending and ownership for all, that they ever held a gun to an underwriters head and said “approve it.” i guess i really lean towards the lenders in the blame game. they’ve always required a signed 4506-t for any mortgage, but they only began ACTUALLY using those forms to get your tax transcripts in the past year. previously, it was just another signed doc to stick in the file that they never pursued. and on the “liar loans,” how difficult would it have been to call the employer and simply ask how much the applicant actually makes? there were just SO MANY ways that the lenders could’ve verified that these borrowers WEREN’T qualified and i always believed that is what underwriters are for. some buyers, would of course, still been able to commit fraud and get loans, but in most cases it wouldn’t have been tough for a lender to figure out that the buyer should not qualify. they just had no incentive (other than ethics) to do so.

Home ownership is in fact good for America providing the borrower is responsible. An overwhelming number of studies show much more stable negighborhoods that are owner occupied versus rented. And yes, these studies are adjusted for demographics.

Unfortunately the government fed by money from NAR (and the fact that 63% of homeowners vote Republican)came to believe that the rising homeownership rate was even better for America. However, simply putting someone in a home does not make them responsible citizens. The truth is that only about 60% of Americans are responsible enough to own a home.

I think to truly apportion blame, it would take a pie chart. I haven’t decided what percentage of the pie that I’d ascribe to government policy. It wouldn’t be 100%, but it would be a healthy slice!