Despite concerns in some quarters that we might be inflating another housing bubble, the government is apparently more worried about a slowdown in the housing market. In addition to John Berlau's piece, the Wall Street Journal has further news from everyone’s favorite spectacularly failed government lenders today, and it suggests we’ve learned absolutely nothing since the economic crash:
On Tuesday, Mel Watt, the newly installed overseer of Fannie Mae FNMA +4.38% and Freddie Mac, FMCC +5.57% said the mortgage giants should direct their focus toward making more credit available to homeowners, a U-turn from previous directives to pull back from the mortgage market.
In coming weeks, six agencies, including Mr. Watt's, are expected to finalize new rules for mortgages that are packaged into securities by private investors. Those rules largely abandon earlier proposals requiring larger down payments on mortgages in certain types of mortgage-backed securities.
The steps mark a sharp shift from just a few years ago, when Washington, scarred by the 2008 crisis, pushed to restrict the flow of easy money that fueled the housing bubble and its subsequent bust. Critics of the move to loosen the reins now, including some economists and lenders, worry that regulators could be opening the way for another boom and bust.
We’re still in the depths of a recession caused primarily by gobs of money flowing into sub-prime mortgages. Regulators, pressured by left-wing community organizers, wanted to achieve “diversity” in homeownership. So they stripped away the mortgage standards, and the GSEs and private banks went to town. Now, after 40 percent of American wealth was destroyed when the housing bubble burst, we’re making the same mistakes all over again.
Fannie and Freddie, bastard children of the government’s equality fetish, cost $188 billion to bail out. Now that they’ve paid the government back (with money lent to them by the government, of course), they’re playing with fire all over again. Instead of risking another bust, why don’t we shutter the GSEs and get the feds out of the social engineering business entirely?