CT Blue

“There are two things you will never wish to watch: the making of sausage and the making of legislation.”

The above has apparently been variously attributed, but no matter who said it, it was a base canard against all the honorable sausage makers out there.

I commented before on the Senate’s foreclosure prevention bill, which contains an absurd tax break for homebuilders. Apparently, that is not the only bit of mischief our lawmakers have put into this bill. Dean Baker points with approval to this editorial in the Washington Post, which exposes yet another piece of idiocy in the bill:

We refer to a $7,000 tax credit (payable over two years) to anyone who purchases a foreclosed home within a year of the proposal’s enactment. Supposedly, this would help clear the nation’s swollen inventory of repossessed properties, thus propping up home prices more generally. Here’s the catch. For lenders as well as borrowers, foreclosure is an expensive hassle. If at all possible, most banks would rather avoid repossessing a house, which they must then try to resell. But, by making it cheaper to buy a foreclosed house than a comparable unforeclosed property, the tax credit makes it more feasible to sell one. The cost and hassle — for the lender — of foreclosure go down, and the benefits go up. Other things being equal, lenders would be that much more likely to foreclose — rather than to help homeowners stay in their houses on modified terms.

I haven’t read the bill, and my inherent laziness prevents me from doing so, but if it applies to persons buying at foreclosure sales, such as we have here in Connecticut, it would allow the banks, who often bid in their own foreclosure sales, to pocket the tax break.

By the way, the Post also has something to say about the tax break I mentioned on Thursday:

Perhaps the only provision that’s more objectionable is the bill’s $6 billion tax break for money-losing home builders — who threatened not to give any more campaign money when they got shut out of the economic stimulus bill in February.

Those homebuilders withholding their contributions are likely not the guys who build one or two spec houses a year. They are the giant developers, who made big bucks in an unholy alliance with the subprime people.

I would like to think that provisions like this are the price the Democrats must pay for getting sufficient votes to pass an otherwise needed bill, but even I am not that much of a true believer.