Should we abolish Fannie Mae and Freddie Mac? Should we eliminate the home loan interest income tax deduction?
Hardly likely that this would come to pass, but that’s what this Wall Street Journal columnist recommends:
As expected, the Treasury on Christmas Eve increased the amount of money it can plow into Fannie Mae and Freddie Mac to keep them solvent. Before, the U.S. had pledged up to $200 billion to each. Now, over the next three years, the Treasury can spend as much as is needed to prevent their net worth going negative …
There are strong arguments for abolishing housing support for everyone except the poor. No other advanced economy with high home-ownership levels has Fannie- and Freddie-type entities. But not only are they unnecessary, they also caused harm. In good times, they probably kept house prices above true market levels, shutting potential buyers out. And they played a central role in the housing crash with their huge purchases of dangerous Alt-A mortgages. What is more, their politically favored status likely made it easier for executives to practice misleading accounting earlier this decade.
Granted, the Treasury might not have wanted to cause jitters in the mortgage market by letting Congress get involved. But at some point the U.S. needs to be able to make economic policy without worrying about every turn in the housing market.
— Peter Eavis
Graph courtesy Wall Street Journal; source, Fannie Mae
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