Last week our lead item was about how some government agencies believe that the finance sector is failing to recognize the perils of climate change so they might need to be forced to do so. But now the New York Times gloats that climate change is destroying a hallowed “American institution”, namely long-term mortgages: “Up and down the coastline, rising seas and climate change are transforming a fixture of American homeownership that dates back generations: the classic 30-year mortgage.” So which is it? Are the banks weighing the risks or not?
Alarmists have been telling us vehemently that governments must step in and rig financial markets because bankers and other investors are too dumb to realize the seas are rising in Gaia’s wrath to wash away the bourgeoisie along with alarmist celebrities who keep buying seaside mansions. But now it turns out that the banks are in fact weighing the risks, they just don’t think they’re as big as the alarmists claim. Maybe that’s because the alarmists have been saying the seas are rising at an accelerating pace and they’re not.
According to the Times, “Home buyers are increasingly using mortgages that make it easier for them to stop making their monthly payments and walk away from the loan if the home floods or becomes unsellable or unlivable. More banks are getting buyers in coastal areas to make bigger down payments — often as much as 40 percent of the purchase price, up from the traditional 20 percent — a sign that lenders have awakened to climate dangers and want to put less of their own money at risk. And in one of the clearest signs that banks are worried about global warming, they are increasingly getting these mortgages off their own books by selling them to government-backed buyers like Fannie Mae, where taxpayers would be on the hook financially if any of the loans fail.”
Climate change isn’t the cause of banks selling mortgages to Fannie Mae. The U.S. housing market underwent a massive shock back in 2008 because “government-backed buyers like Fannie Mae” had been encouraging insanely risky lending to people manifestly unable to service their mortgages. And the article eventually blurts out that the 30-year mortgage is the product of government intervening in the market, or perhaps rigging it, which it makes sound like an achievement: “the threat that climate change poses to the 30-year mortgage is… striking at an American social institution that dates from the Great Depression. Before that, many home loans required owners to pay lenders back just a few years after buying a house, which led to waves of defaults and homelessness, according to Andrew Caplin, a professor of economics at New York University. In response, the federal government created the Federal Housing Administration, which in turn standardized the way Americans finance their homes. There was nothing magical about a period of 30 years, Dr. Caplin said; it simply proved useful, making payments predictable and affordable by stretching them out over decades…. But now, as the world warms, that long-term nature of conventional mortgages might not be as desirable as it once was, as rising seas and worsening storms threaten to make some land uninhabitable. A retreat from the 30-year mortgage could also put homeownership out of reach for more Americans.”
As we have observed, one difficulty with this theory is that the seas are not rising any faster than they were 50 years ago and in some places appear not to be rising at all. And except for the pricey oceanfront areas there are no seas to rise anyway. And storms are not worsening. But climate-change journalism has long since washed away the venerable American tradition of checking theories against facts, so the article roars on that “Changes to the housing market are just one of myriad ways global warming is disrupting American life, including spreading disease and threatening the food supply.” Which makes not being able to afford that seaside home seem less of a problem. Although we’re curious to know which diseases and what parts of the food supply.
Never you mind. “In 30 years from now, if global-warming emissions follow their current trajectory, almost half a million existing homes will be on land that floods at least once a year, according to data from Climate Central, a research organization. Those homes are valued at $241 billion.” Although the article does not specify which data from Climate Central it’s probably from this study or one like it. And as expected, if you read down far enough you discover that “their current trajectory” is the usual exploded RCP8.5 scenario the Climate Central study calls the scenario with “unchecked pollution” whereas “unchecked speculation” would be more appropriate.
If governments stop paying people to build houses in places that have always been subject to flooding, and ignore other risks, it would actually be a good thing. It would stop transferring wealth from prudent taxpayers to reckless ones. And if the New York Times would stop blaming climate change for everything including “Pregnancy Risks, Affecting Black Mothers Most” and peddling absurd emissions- and sea-level-rise scenarios as “experts say” or “according to researchers”, it would be good too.
As Ross McKitrick recently pointed out in the Financial Post, the RCP8.5 scenario projects that industrialization will continue to accelerate, such that by 2100 even the poorest nations in the world today will be richer than the richest countries are now. It also projects that accelerating industrialization will cause so much global warming that the poorest countries today will be uninhabitable wastelands in 2100. That is, the scenario is internally incoherent, projecting that much of the world will be a super-rich wasteland in 2100. Does an organization - the IPCC - that creates nonsense like this deserve our attention?
The perils of climate change are supposed to be recognized because of securities laws. If a company is selling securities to the public it cannot misrepresent the risks the company faces. It is therefore supposed to advise existing and potential shareholders of the risks that its products or services will face if there is climate change, and what steps it is taking to reduce such risks. Nice theory, but thoroughly impractical. How does a company today warn shareholders of the risks it faces by 2100 without being able to predict what that climate change will be in its business area under various hypothetical future scenarios with various hypothetical mitigation efforts such as geoengineering and how those risks will affect that particular company's business?