Except that student loan debt can't be discharged in bankruptcy. These ultra risky loans are being extended precisely because the government essentially removed all of the risk.
This is the great irony of government intervention in the economy.
When they try to make housing more affordable, it becomes dramatically less affordable.
When they try to make college more accessible, it ends up raising the cost of tuition to astronomical levels.
When they try to correct a perceived injustice, it ends up creating real injustice by picking winners and losers.
When they raise the minimum wage, they put people out of work.
When they try to guarantee defined retirement benefits, they end up going bankrupt and robbing their workers of the pensions they were promised.
When they subsidize dying industries to "save jobs", they ending destroying more jobs than they save.
Yet despite these failures, people on both sides of the aisle seem to think that the solution to the problems created by government policy should be solved by additional layers of policy. It's a feedback loop of insanity.
> When they try to make housing more affordable, it becomes dramatically less affordable.
Zoning law (the biggest factor in restricting new housing growth) was never about making housing more affordable, it was supposed to be about quality of life (and many times was actually about racism, see redlining era)
I was referring to Prop 13, rent control laws, federal tax breaks given to homeowners, and the numerous subsidized home loan products provided by Fannie, Freddie, the Federal Housing Administration, and the Veterans Administration. All of these were intended to make housing more affordable, but ended up jacking up asset prices to extreme levels.
I agree with you that zoning was never intended to make housing more affordable, but it's not the only policy in play.
A lot of these products probably made sense in an era where there was a massive amount of undeveloped farmland suddenly available to build houses on and connect via road - if undeveloped land is cheap, the costs of a new house can't rise significantly above the cost to build a new house, so offering incentives to homeowners makes some amount of sense.
This doesn't happen anymore as most cities are at "peak suburb" - the undeveloped land that still exists is so far out that nobody wants the insane drive into the city (and rightfully so).
But yeah in the 21st century where everyone is competing the afford the same few properties in the same few neighborhoods, subsidizing homeownership is just subsidizing bidding wars. There's no productive economic activity being subsidized like it used to be (construction of new homes on undeveloped land yields more living space for the city, which I would consider productive) - a bidding war just leads to the previous homeowner getting a fatter payout.
In theory, if prices were kept to reasonable levels via sufficient construction, I could get behind (toned down versions of) prop 13 and rent control. It's just clearly they exacerbate price issues, and to say California has a price issue is an understatement.
I went to college at Illinois State University, which is in Normal, IL. The thought of there being a surf shop in a town that's in a middle of a cornfield with no water nearby just cracks me up.
> Capitalism is a prerequisite for lobbying. Regulations are not.
In order for lobbying to be effective, there must be a large and powerful government which can be lobbied to. The reason the farm lobby spends millions of dollars is because they get billions in subsidies in return. It would be more accurate to say that big government is a prerequisite for lobby, since a small government that merely enforces property rights wouldn't be worth lobbying to.
> This is bank propaganda. It's been debunked countless times
It's an empirical fact that Fannie and Freddie, which are government sponsored entities that buy the largest share of mortgages, lowered their standards significantly leading up to the crash in order to make artificially cheap loans more accessible to people who would otherwise be considered too risky to lend to.
> The bad loans were made by people who knew exactly what they were doing.
Lenders originated subprime loans because the government guaranteed to buy them via Fannie and Freddie. If Fannie and Freddie hadn't existed, these bad loans would have never been made in the first place.
Same, although I have four rental units and one AirBnB. I wasted years of my 20s trying to come up with a monetizable SaaS product until I realized that I could earn passive income through "boring" businesses like rental properties.
Now that I've had a taste of passive income through real estate, I've come to despise the tediousness of writing software. I can barely bring myself to do it anymore now that I don't "need" the income from my job to survive. My plan is to keep acquiring rental properties over the next fews and then quit the tech industry for good once I have enough to live comfortably.
I am in a similar position and would like to know how you got started with rental units. Are you using a property manager like it was mentioned in a previous comment? Do you recommend AirBnB vs. long-term rentals?
I used equity from my primary residence to finance my first investment, since I couldn’t find other means of financing. I don’t think my area would be good for AirBnb although I haven’t tried, should probably read more about it. I am doing everything myself for now, since I get better ROI, but will probably move to prpty mngmt once I have more properties.
I self-manage since my properties are in the same small city that I live in. It's not the much work. I love AirBnB but you have to be careful with it - a lot of towns and cities have outright banned short-term rentals or at least made it very difficult to operate them legally.
A coworker who lives in PA sold his unit after laws were changed that would no longer allow his AirBnB to be profitable. He would have to add a sprinkling system and other things that cost 30k+
> It amazes me that they didn't call his bluff. They could have said, "We'll let you keep some of your shares, so if this ever works out, you'll make some good money."
If they had said that, Neumann would have just continued to nuke the company until SoftBank's remaining $8 billion of equity in the company went to $0. SoftBank paid him off to prevent him from further destroying the company.
Isn't there some legal fiduciary duty that would prevent the executives of the company from doing this explicitly? Just because 51% of the shareholders want to lose their money doesn't mean the executives can act without regard for the 49%?
Sort of. You'd be left paying the difference of 3.5% to 20% (16.5% or $49,500) in a FHA Mortgage Insurance Premium (MIP). This means another loan that you need a 1.75% down payment for (making your downpayment ≈ 3.8% or $11,400) that adds another payment (≈ $400) in addition to the mortgage. MIPs last the entire life of the FHA loan, too.
Yes, it's effectively a higher interest rate on the entire loan, but my point was that you don't need a massive amount of cash up front to close the deal.
Down payment is only a portion of the costs to buy a loan. My 3.5% down FHA mortgage on $309K purchase price cost me about $16K. My previous 5% down conventional on $103K was around $12K.
You also see it in crumbling roads, ancient subway systems, shitty public schools, dumb regulations that make the market less competitive, "affordable" housing initiatives that make housing less affordable, pointless subsidies for farmers, and unsustainable pension funds.
This is true. It requires much more from the general populous than just the cash. Few private citizen wants to invest the time to fix the allocation. It’s a classic free rider problem.
