Academic

PETER WALLISON: When Economic Policy Became Social Policy. ?Watching the Treasury conference on ho?

By Glenn Reynolds

PETER WALLISON: When Economic Policy Became Social Policy. “Watching the Treasury conference on housing finance earlier this week, I was struck by the gloomy thought that we will never get out of this housing mess until we are ready to face facts. Treasury Secretary Tim Geithner?s remark that the demise of Fannie Mae and Freddie Mac was caused by their pursuit of short-term profits was not a constructive contribution to the resolution of the major issues before us. In reality, Fannie and Freddie were doomed by a badly designed government housing policy, and government efforts to disguise its responsibility with a false narrative will only make a solution more difficult. . . . When in 1992 Congress dragooned Fannie and Freddie into lowering their underwriting standards, it confused the economic goal of creating a viable national mortgage market for good quality mortgages with the social policy of increasing home ownership by making mortgage credit available to low-income borrowers. The added benefit for Congress was that it could achieve the social goal without budgetary consequences; the operations of Fannie and Freddie were and still are off-budget.”

Full post as published by Instapundit.com on August 23, 2010 (boomark / email).