Today in the Taxosphere

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Today in the Taxosphere

Many bloggers are still processing the effects of the recent financial meltdown and bailout. Here are a few fresh views on that and other matters:

  • Five Cent Nickel explains what happens to your mortgage if your bank goes under. Part of the trouble with the mortgage boom was that the mortgage was disconnected from the people who originated it — you might live a block away from your mortgage broker in Dubuque, and have no idea that your mortgage was being traded back and forth between hedge funds in Greenwich, bankers in London, and sovereign wealth funds in Dubai and Beijing. But that disconnect works out in your favor when the bank you have a relationship with collapses.
  • An

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Tax Consequences of the Great Unwinding

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Tax Consequences of the Great Unwinding

In retrospect, we’ll view the last forty years as a bizarre aberration: during that time, speculation on an enormous scale was tolerated, celebrated, and even subsidized. The fact that this speculation occurred in residential real estate made it all the more insidious and dangerous.

Looking over the last forty years (from when Fannie Mae was privatized to when it collapsed), it’s clear that tax incentives played a huge role in creating the mortgage market, and in inflating the value of the real estate that fueled this market.

The mortgage interest tax deduction made it seem smarter to invest money in a home rather than another means of savings. Of course, a tax exemption doesn’t make homes any more comfortable, or… Read more…

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