Wednesday, November 19, 2014
If you're having trouble buying, selling, or -- like former Fed Chairman Ben
did -- refinancing a home, you might have our paternalistic, "helicopter-parent-from-hell" government to thank. Bruce Bialosky writes about some of the
"unintended consequences" of Dodd-Frank including significant
impediments to buying and selling houses:
... It used to be that a mortgage broker or real estate agent would contact their reliable appraiser to get a timely and hopefully accurate evaluation of a property. The lawyers behind Dodd-Frank saw that as a means of manipulation and no doubt on some occasions that would occur.The law has also resulted in lots of third-party appraisers falling under the control of "big' lenders; difficulties in obtaining financing for people with unusual sources of income, and an end to discounted fees by mortgage brokers.
The new system requires a third party service to be contacted that, of course, charges a fee to obtain an appraisal that is added on top of the appraiser's fee. That means out of the box the cost of appraisals have been driven up. Koevary says it is worse than that. He and his fellow professionals used to be able to contact their friendly appraiser and get an idea whether the property will appraise at either the sell price or refinance price. That is no longer possible because of the requirement of using a third party service. Koevary states that often people will incur appraisal fees under the new system and find out the deal will not fly. Thus, his client gets stuck with significant appraisal costs which have done nothing but kill the deal.
I am an advocate of laissez-faire, and I oppose laws like Dodd-Frank on moral and practical grounds. Regulars know this already, and that I consequently never supported this law. That said, on my reading of this column, I am beginning to feel ill at ease with Bialosky's term, "unintended consequences". I am not singling him out for criticism: Many conservatives use the term, and I probably have used it myself in the past. However, my uneasiness lies with the idea that the phrase may be letting proponents of such laws off the hook too easily for meaning well. I am not an economist, but at least two economists I know of have pointed out that central planning is doomed to fail for removing rational thought from the economy. History is also littered with failed attempts at central planning. Perhaps we could use a term like "unforeseen consequences", or "side effects", or even "further ramifications" instead. (Or maybe "unplanned consequences of central planning" would be the ticket.) In any event, I have no patience with the idea that, any time something goes wrong, we should reach to the cabinet for even more government interference, as if that worked the first thousand times. (And I haven't even touched on the question of whether it is the right thing to do with government...)
My question for advocates of government regulation of everything is this: How many "unintended consequences" does it take before I should begin to wonder what it is you intend to do?