President Bush signed the bail-out bill this morning. From Marketwatch:

The massive law will provide an emergency safety net for mortgage giants Fannie Mae and Freddie Mac, provide $300 billion in additional loan guarantees for the Federal Housing Administration, offer a temporary tax credit for first-time home buyers, and give money to local governments to buy foreclosed properties before they can blight the neighborhood.

This is going to artificially raise the valuation of houses again and take the risk away from the banks. The cycle will start all over again. It also gives the government more control over home values and banking.

If the banks can take advantage of government (taxpayer) funds to reduce their risk exposure, then they will make bad loans again in the future. This will lead to putting high numbers on houses again, and lets people take out fake equity so that they can purchase television sets.

It will also give the government a new standard. Since they are in the business of buying houses, then we have unfair competition against the private sector. The government has tried price and wage controls in the past and the results were catastrophic. Imagine what happens when they start putting prices on houses and telling us if we qualify for a loan. I know that we have seen some issues with the private sector doing this, but putting it into the hands of the government isn’t the solution.