I wish I could summon the energy it takes to be outraged, but at this point I’m so jaded by the endemic inefficiency, ineptitude, and downright corruption of the federal government, it would take a lot more to surprise me these days. How sad is that?
At the start of his term, one of President Obama’s ostensible goals for the $800 billion-strong Recovery Act was to strengthen the economic recovery by providing some cushion in the housing market. (Of course, he proclaimed, there would be mechanisms in place to prevent the possible abuse of his economic largesse.) Within the stimulus act’s provisions was a first-time homebuyer tax credit and mortgage assistance, which granted the Federal Housing Administration the authority to insure loans at a higher rate in high-cost housing markets. Applicants who were delinquent on their federal taxes weren’t supposed to be eligible to receive the FHA’s stimulus-assistance, but – gasp – the FHA didn’t really have a system in place to obtain that information.
The result? The federal government doled out almost $1.5 billion in tax credits and government-backed mortgage loans to tax cheats, according to a GAO audit released Wednesday.
Under government rules, delinquent taxpayers are supposed to be ineligible for the mortgage insurance program unless they have reached a repayment agreement with the Internal Revenue Service. But the Federal Housing Administration didn’t have the right controls to weed out bad applications, said the Government Accountability Office, Congress‘ chief investigative arm.
That meant FHA insured $1.4 billion in mortgages for 6,327 borrowers who collectively owed $77.6 million in unpaid taxes, or an average of more than $12,000 each.
The auditors said that as a category, the tax cheats had foreclosure rates up to three times as high as other borrowers, which meant the delinquent taxpayers exposed the government to even greater risks…
“The stimulus-spending program was ill-conceived, with far too little oversight,” [Sen.] Grassley said. “It shouldn’t surprise anyone, unfortunately, that tax dollars have gone to tax cheats. It’s another one of many negative consequences of writing checks without enough checks and balances.”
Whaaat? Large bureaucracies that aggressively distribute ‘free’ money are fraught with waste, fraud, and abuse? Who could’ve seen that one coming?
The federal government should absolutely not be involved in the business of making these types of loans. We already have a private sector that provides said services, and if an individual is unable to obtain a loan from a private financial firm – it’s probably because they aren’t a very safe investment. Private institutions are careful and judicious with their money, but the federal government has ‘unlimited’ taxpayer dollars at its disposal. “Hey, it’s not our money – we’ll go ahead and distribute money to people we see as deserving of these loans as far as it serves our political goals!” Yeah, that’s just a brilliant idea.
This is my precise problem with the government getting so intensely involved in financial markets and creating such august bodies as the “Consumer Financial Protection Bureau.” Really? The federal government is supposed to be able to “protect” us from those big, bad banks and financial firms? Who the heck is going to protect us from the artifices of the federal government?!