Things don't work that way. In the steady state, existing real estate prices are determined by competition with new housing costs, which wouldn't see any big decrease. With no financing available, home ownership would simply become less available to ordinary folk. Barring rent control, homes would become rentals.
Then what would happen to all of those empty homes, many of which were built, bought, and paid for decades ago? They could still be used. If what you said in your earlier post is true, the banks would just abandon them anyway, and the government could then take them over and sell them at a substantially lower cost and more manageable for the aforementioned young couple starting out. There would be no need for financing, since the new homeowner could just pay the government monthly installments until it's paid off.
This is because you have an excellent command of the language.....& you're not crazy.
They don't have much control at all. Things they do which the OP dislikes are just a response to markets & to regulation (which requires foreclosure over renegotiation in many circumstances). And again, if gov imposes regulations which make it riskier & more costly to lend money, then lending goes down, & interest rates go up. Is this cost worth it just so people can stay in homes with loans they won't repay?
It depends on what the cost is, who's paying it, and whether everyone is paying their fair share.
I won't speak for the OP, although I think the foundation of many complaints against big banking is rooted in the perception that they appear to be gaining the lion's share of the fruits of society's labors, while ostensibly doing the least amount of work in any given enterprise. A banker is neither an architect nor an engineer, and a bank is not a factory, farm, or mine. And they certainly didn't create the land on which these houses are built. At best, their function is administrative and bureaucratic - something that any government can do.
Of course, even administrators and bureaucrats deserve to get paid, but only at a level commensurate with the level of the value of their work. If they're perceived as doing the least amount of work, then those who see them getting the most money might have reason to suspect that dishonest or otherwise nefarious activities are taking place.
When considering some of the shady dealings involving banks and real estate which have become known to the public, I would say people have enough cause to be wary of the banking industry. I don't think we need to go overboard and condemn them all, but perhaps if they did a better job at policing their own, it wouldn't be necessary for the government to step in and impose these dread regulations they hate so much.
Example:
I own an apartment building worth $1000K, based upon net income & capitalization rate (the market's expected rate of return).
If a rent control law proposed rolling back rents to some prior level, then this would reduce net income, thereby lowering the value of the property.
(We defeated a rent control ordinance a few years back which tried a roll back.)
A 20% roll back in gross income, would yield a larger reduction in net income, perhaps 30%, which would result in a $300K loss in value. While not a physical taking in the sense that title of a portion of the property transfers to the state, it is a taking of economic value, transferring it to the tenants. This will create a looming housing shortage, as developers see that anything they build will lose value over time.
I think the question of what something is "worth" is the big issue here.
What seems apparent right now is that there's a shortage of affordable housing, yet there seems to be quite a glut of
unaffordable housing, along with numerous boarded-up storefronts and an increasing number of empty lots in cities all across the country. I know of quite a few businesses around here which have had to close up - not because of taxes or government regulations, but because their rents were too high.
As far as the issue of price controls and confiscation, what it really comes down to is a difference of opinion over what something is actually worth. But if it's something needed for the benefit of the greater society, then the government has to consider what is actually affordable for the general population. That's why utility rates are regulated, among other things.
That would depend upon one's definition of "successful". If a portion of property is taken by government, those who favor takings would see it so. Those of us who respect property rights would see it otherwise.
I think property rights should be respected, although if property rights come into conflict with human rights, then I think human rights should prevail. In WW2, it was more of a national security concern, and the government just didn't have time to fiddle around. They had to lay down the law.
In a larger sense, government also has a role to maintain political stability and harmony in society, in addition to safeguarding the rights of its citizens. Keynesianism was kind of a happy medium between hardcore socialism and capitalism, taking the better elements of both systems and combining them into a system that worked quite well from the 1940s up until the 1970s. Once Friedman and his Chicago School came on the scene (with Greenspan and Reagan being among the disciples), they wanted to fix something that wasn't broken, and then they ended up breaking it.
And that's why we're in the mess we're in now.
If you make it less profitable to build housing, then you'll create a shortage. On top of this, you're still confiscating some of the homeowner's value, which could make it impossible for them to sell if they don't net enuf to pay off their loan plus transfer costs.
I'm not particularly worried about any housing shortage at any point in the near future. I can walk a mile in any direction from where I'm at now and find quite a number of vacant properties for rent or for sale.
My grandparents and many of that generation built their own houses, not because it was profitable - but because they wanted a place to live. My grandfather only had an 8th grade education, and he was able to do it. I'm not really worried about a housing shortage. People will find a way, and perhaps it may even lead to a resurgence of self-reliance with people building their homes with their own two hands. Programs like Habitat For Humanity do a lot of good, so perhaps a more concerted and widespread effort in that direction could work wonders.
Government would put it to a productive use? That hasn't worked in Detroit. Essentially, you're proposing enacting socialism by inducing owners to abandon private property.
I don't know much about what's being done in Detroit, although I've heard about their former mayor and a lot of the corruption of that city. Like many cities in the old Rust Belt, they've had a difficult history, especially in recent decades due to deregulation and outsourcing. A lot of things that used to be made in America are made in other countries, and this has taken its toll on cities like Detroit.
When you say that I'm "proposing enacting socialism," that seems like kind of a loaded term which can be interpreted any number of ways. In some ways, socialism might be seen as a hedge against revolution - a compromise which can forestall or prevent any political upheaval or chaos which is often associated with some of the more malignant regimes in history.
I'm thinking in broader terms too. The difference is that I understand the induistry well enuf to see that these proposed changes are naive & dangerous.
I'm also looking at some of the historical examples and the consequences of not nipping things in the bud before they get too far out of control.
As far as what's "dangerous," that's also a matter of perspective. If the net worth of a wealthy banker is reduced from $10 billion to $5 billion, I may not regard that as particularly "dangerous," although
he might think that it's the end of the world and that the sky is falling. I would not share that perspective.
I can only draw upon the example of history and demonstrate that whenever there are large disparities between rich and poor, and when there are heavier financial and economic pressures exerted upon the working classes, if left unchecked and allowed to fester, there can be consequences which are indeed quite dangerous.
In many ways, I think it's the capitalists who are naive. I say this because, by and large, they speak in an abstract, ideological context, apparently unwilling or unable to understand the reasons why many of these horrible government regulations had to be enacted in the first place. They didn't just pop up out of nowhere because a bunch of socialists decided to stick it to the capitalists for no reason.
Big banking is not the problem usually, although my problems have been due to governement interference, eg, demanding foreclosure of current loans for regulatory reasons, prohibiting lenders from renegotiating loans with troubled borrowers, & by taxing the bejesus out of us when we do refinance loans in order to avoid foreclosure.
So are you saying if the government didn't interfere, there would have been fewer foreclosures? I think the government should work to try to reduce foreclosures so more people can keep their homes. That's what Obama said he was going to try to do, but just as with most political promises, they always fizzle into dust.
Don't get me wrong. I'm not saying the government is a panacea to all of this, and to be sure, a great deal of reform is needed within government itself. We need a better mechanism and system of checks and balances to root out corruption and eliminate abuses of power.
What I propse:
Government should stop incentivizing & subsidizing speculative buying of real estate. This will lead to treating home ownership as fulfilling personal nees, rather than a hedge against inflation, thereby preventing housing bubbles.
Yes, this makes sense. I suppose the ultimate issue rests with government anyway. Banks are only as powerful as the government will allow, but overall, the government has allowed quite a bit.
