An Economic Prophet in 1979

The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably means more bad loans than otherwise. They force the general taxpayer to subsidize bad risks and to defray the losses. They encourage people to "buy" houses that they really cannot afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raising the cost of building for everybody (including the buyers of homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase the overall national production and encourage malinvestment.
-Henry Hazlitt. Economics in One Lesson (46-47).