Single family homes and Profiteering

I know one of the things that makes capitalism work, market economies, in the Grand old land of opportunity is the profit motive.

I am ok with people speculating, flipping, and causing chaos in downtown markets, in areas like Hawaii, San Diego, NYC etc. I draw the line with profiteering single family homes in the suburbs, where the thankless workers who fuel the whole system of wealth for others, are forced to reside in the few hours they have away from the ball and chain they call their job.

In the most recent article in Barrons, an article gets into detail about the workings of Fannie Mae and Freddie Mac, well, how they used to work anyway, before the US government took them over in conservatorship.

Well, apparently in an effort to realize huge gains for shareholders, and increase their market share, they took on a lot of crappy paper that they shouldn't have. This means loans that wouldn't be paid back.

Fannie and Freddie buy mortgages to take them off the banks books so they can make new loans, and sold some of them away as securities - apparently guaranteeing them against default at least part of the time.

The article makes an interesting comparison. Utility companies are regulated, and I happen to know, from reading Security Analysis by the father of value investing, Benjamin Graham, that the oversight (ie Corporation Commission) sets limits on rate increases, and generally limits the companies/investor return to what is deemed reasonable - typically around 6% return on investment.

Why should scalpers be let loose in residential real estate, in the suburbs, to inflate home values to 2-3-4 times what median incomes can support? Why should our State, City governments depend upon nothing but the continual increase of housing values and employment from housing related acitivities for income?

This country needs Economic leadership - we need a national vision - we need to have a common goal. I think it could be something like a united effort to lead the way in curing diseases and alleviating human suffering. Something, for God's sake, more meaningfull than ever-expanding suburbs, with ever increasing values (not really), needing cheap, exploitable immigrant labor (funny how the immigrant labor managed to swarm in when it was needed, even in this post 9/11 world - can you say border security?)

Stop playing roulette with housing, you political jerks. Get a vision.