Federal backing of big mortgages threatens taxpayers - again

Federal backing of big mortgages threatens taxpayers - again

January 5th, 2012 in Opinion Free Press

Can you think of a single good reason why the federal government should require U.S. taxpayers to guarantee home loans of up to nearly $730,000?

A few months ago, the maximum loan amount that government-run mortgage giants Fannie Mae and Freddie Mac could back was reduced to about $626,000.

Even that was too high. But in a misguided attempt to prop up the anemic housing market, Congress unwisely voted recently to increase the maximum loan amount that the federal government will guarantee against default to $729,750.

That means you, the taxpayer, are on the hook if someone takes out such a large home loan and then fails to repay it!

Do you think that's good economics -- much less fair.

Can the federal government have forgotten that it helped bring about the housing market collapse in the first place when it pressured financial institutions to give home loans to people with shaky credit -- and then placed on taxpayers the risk if those borrowers defaulted?

Has Washington not seen the pain that millions of foreclosures have caused, both to individual families and to our economy as a whole over the past few years?

Shouldn't that track record of failed federal meddling in the housing market be a warning against still more meddling?

It should be but apparently it isn't.

Federal intervention in the housing market has proved disastrous. It is a sign of remarkable irresponsibility that Washington sees even more intervention as a solution to the problems created by its earlier interference.