After signing the financial reform bill, Obama must work to end the corruption inherent in any federal institution designed to boost homeownership. Congress was bought off by the housing industry to lower lending standards, creating the market bubble. Fannie Mae and Freddie Mac need to go.
One triumph for the United States during the 20th century was that it went from being a nation of largely renters to mostly homeowners. The American dream was made real in picket fences and title deeds.
The 21st century may look very different, however, once President Obama decides whether taxpayers should continue to support private home purchases – knowing in hindsight how far the housing market has collapsed since 2007 while leaving government with more than $400 billion in debt. That red ink is mainly due to a federal takeover of mortgage giants Fannie Mae and Freddie Mac, the great enablers of the home-buying binge.
So far Mr. Obama has put off the issue of whether to reduce the federal role in buying a home, preferring instead to wait until the home market further stabilizes and his Treasury Department devises reforms for Fannie and Freddie. In the meantime, he signed legislation Wednesday aimed at reforming other areas of the financial system – but not the public mortgage system.
Americans must be on guard to prevent government from again creating another housing bubble. This last one burst with little warning, polluting the economy with “toxic” mortgages that spread like the BP oil spill on the Gulf of Mexico.