David Stockman, "How PIMCO Is Holding American Homeowners Hostage"
[excerpt:]
It turns out that the real vampire squid wrapped around the face of the American taxpayer isn't Goldman Sachs after all. Instead, it's surely the Pacific Investment Management Co. As overlord of the fixed-income finance market, the latter generates billions annually in effort-free profits from its trove of essentially riskless US Treasury securities and federally guaranteed housing paper. Now Pimco wants to swell Uncle Sam’s supply of this no-brainer paper even further -- adding upward of $2 trillion per year of what would be “government-issue” mortgages on top of the existing $1.5 trillion in general fund deficits.
This final transformation of American taxpayers into indentured servants of HIDC (the Housing Investment & Debt Complex) has been underway for a long time, and is now unstoppable because all principled political opposition to Pimco-style crony capitalism has been extinguished... The HIDC subsidy system has been doubly perverse. Whereas the nation lived way beyond its means by saving too little at home and borrowing too much abroad, even the meager savings we did generate were artificially channeled into the least-productive investments. Thanks to the pervasive HIDC subsidy system we now have big, new houses and small, aging factories....
Pulling the plug on HIDC will rescue millions of households from mortgage-payment slavery and put them into a buyer's market for rented-housing services -- a social welfare gain under present circumstances. To be sure, they'll lose their credit and probably their credit cards in the process. But the days of living off the housing ATM and bank-issued plastic are over for the American people anyway. Creating an honest financial environment where households are required to rebuild their balance sheets and consume within their means isn't a disservice or injustice to anyone.
This final transformation of American taxpayers into indentured servants of HIDC (the Housing Investment & Debt Complex) has been underway for a long time, and is now unstoppable because all principled political opposition to Pimco-style crony capitalism has been extinguished... The HIDC subsidy system has been doubly perverse. Whereas the nation lived way beyond its means by saving too little at home and borrowing too much abroad, even the meager savings we did generate were artificially channeled into the least-productive investments. Thanks to the pervasive HIDC subsidy system we now have big, new houses and small, aging factories....
Pulling the plug on HIDC will rescue millions of households from mortgage-payment slavery and put them into a buyer's market for rented-housing services -- a social welfare gain under present circumstances. To be sure, they'll lose their credit and probably their credit cards in the process. But the days of living off the housing ATM and bank-issued plastic are over for the American people anyway. Creating an honest financial environment where households are required to rebuild their balance sheets and consume within their means isn't a disservice or injustice to anyone.
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