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When I get the time, I (or one of my astute readers) will revisit this homebuilder bailout issue (for the third time) since it appears it has cleared the Senate.

For past opinions, see The Government Bailout of the Homebuilders May Not Work and Interesting Response to the Government Homebuilder Bailout

Be aware that if this provision becomes law, it will incentivize builders to dump assets at levels and prices that were previously imprudent and economically unfeasible in an attempt to reclaim cash in the form of back taxes. This will exacerbate the strain on the financial sector since it is the devalution of real assets that triggered much of this mess in the first place. Property values will drop faster, property value led defaults will accelerate, and MBS and related securities, products and pools will get hit that much faster and harder as well.

I commented on this last year in the Builders, Banks and Bubbles series. For a gander of how deserving the builders are of a tax break that dwarfs the tax break given to actual homeowners, see Voodoo, Zombies, Lennar’s Off Balance Sheet Accounting and Other Things of Mystery & Myth.