Health Care Reform: The Big Hedge
by: Eric Huebscher
NHB Advisors; Narbeth, Pa.
Almost two years ago, the financial markets collapsed and big banks came running to the government for a bailout. Public opinion held that an era of irresponsible lending and unquestioned growth in the U.S. housing market precipitated the economic downfall of late 2008, just as Barack Obama was campaigning to become our next president. Now, as many citizens blame Wall Street’s largest financial institutions for gambling at the expense of the general public, the current administration has elected to make a few bets of its own in the name of health care reform.
Financial institutions were criticized for lending to homebuyers incapable of sustaining their mortgage payments, and subsequently creating the convoluted securities that ensured that the expense would be shared by all. These institutions operated under an assumption of circular logic: The increased fee revenue and growth of the housing market would properly mitigate the risks of default, even though such increase in credit supply would lead to inflated and unstable property values. This increased availability of credit was encouraged at the executive level, which touted homeownership as the flagship of the American dream. Just as the consequences of Clinton’s National Homeownership Strategy and Bush’s Ownership Society could hardly be considered products of “housing reform” in hindsight, the increase in health care coverage pushed by the Obama administration may have unintended consequences that undermine the true spirit of reform.
