Perhaps we shouldn’t be surprised by President Obama’s demogoguery of the mortgage-industry and housing-market collapse in Falls Church today – after all, it is an election year — but it’s depressing nonetheless. Rather than acknowledging the complexity of the housing-market implosion and the crucial role public policy played in encouraging everyone to buy homes, even those couldn’t afford them through conventional means, the president has chosen to shift all the blame on someone else. And, of course, that “someone else” is the private mortgage-lending market, the scapegoat du jour for this White House. While abuses certainly happened, and fraud and criminal activity should be prosecuted, laying all the blame at the footsteps of this industry is simply populist electioneering and does little to further the interests of good public policy.
Sorting out the housing market will indeed be a long-term process. But the long-term solution is bringing the market back into balance after it was thrown out of whack in a not insignificant way by an “ownership society” myth, propagated and subsidized by both Republican and Democratic administrations. And the new housing-finance bureaucracy will struggle against its contradictory missions of making sure households don’t buy houses they can’t afford (reducing demand) and by making it easier and more straightforward to secure loans (increasing demand). Creating stability in the housing market won’t be aided by the new bureaucracy created to rule over the mortgage industry, although it serves the progressive election-year narrative that it’s the government that must ride in on a shining white horse to save the common person from the evil bankers.