Georgia Senator Johnny Isakson was one of the major proponents of the homebuyer tax credit, a spectacularly failed policy whose only clear beneficiary was the banking system.
I discussed the failures of the tax credit here.
Now Isakson is selling another bad idea. From the AJC’s Retirement savings might help mortgages:
The bill, to be introduced by Republicans Rep. Tom Graves and Sen. Johnny Isakson, is designed to help homeowners struggling to make payments. An outline was provided exclusively to The Atlanta Journal-Constitution.
People with retirement accounts such as a 401(k) typically face a 10 percent penalty for withdrawals before they turn 59 1/2 years old, though there are several hardship provisions that allow some people to avoid the penalty, including medical expenses and college tuition. The bill adds a mortgage payment to the list of hardships, allowing a withdrawal of up to $50,000 or half of the value of the account — whichever is smaller — to pay down a mortgage on a primary residence.
Graves, of Ranger, said he got the idea from a constituent in the mortgage industry.
Wow, I’m shocked. Someone in the mortgage industry thinks it’s a good idea to allow Americans to decimate their retirement savings to pay their mortgages.
So, once again, Isakson is promoting a policy that a) primarily benefits real estate professionals and b) trades long-term health for short-term gains.
As noted in the AJC, homeowners who are desperate to get at their retirement savings can already pull money out with a penalty. They don’t need additional encouragement from this policy, which will inevitably reduce the returns of those who have managed their money well and do not need to make withdrawals.