If the collapse of the U.S. housing market should have taught us anything, it is that federal government intrusion in the market can have disastrous consequences.
Government-backed mortgage giants Freddie Mac and Fannie Mae -- which have now received nearly $200 billion in taxpayer bailouts -- played a big role in encouraging risky home loans that helped bring about millions of foreclosures. Still more foreclosures are expected this year, and home values have plunged.
So it is frustrating and even alarming that President Barack Obama -- in an attempt to "fix" problems created by previous federal involvement in housing -- proposes more such involvement. The president wants Congress to pass legislation that would have government assume the risk for a new multibillion-dollar scheme to help some homeowners refinance their mortgages at lower interest rates. In theory, this would reduce foreclosures.
The president would slap billions of dollars in new fees on banks to offset the cost of the program. But that is just robbing Peter to pay Paul. Those massive levies would be passed along to bank customers in the form of higher fees. So the program would "help" one group of Americans at the expense of others.
The housing collapse led to an unimaginable $7 trillion loss in household wealth in the United States. Not all of that is the fault of risky loans improperly backed by the federal government. In some cases, for instance, borrowers had good credit and took out sensible loans. But then they may have suffered the misfortune of losing their jobs, and soon became unable to make their house payments.
Nevertheless, bad loans propped up by Washington played a huge part in the housing collapse, and it is troubling that we're going down that road again.
Obama "wants lenders to make more of the same risky loans without documentation of income or ability to repay that got us into this mess in the first place," said U.S. Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee.
In fact, nothing in the recent history of federal involvement in the housing market suggests this new scheme is wise, and the president acknowledged that his previous initiatives to help struggling homeowners have not succeeded.
This latest program is another step in the wrong direction.