The ongoing struggles of the housing market are contributing to the softness of our overall economic recovery. Over the last couple of weeks, the Obama administration has restarted debate about further government action to prevent foreclosures and stave off home-price declines — all with an eye toward improving the outlook for a market that has traditionally been a key driver of the broader economy.
The backdrop for these closed-door meetings is that the U.S. government will soon be the country’s largest source of domestic home-mortgage and consumer-credit loans. In reviewing the latest Fed data, Investor’s Business Daily noticed that the total amount of government-financed consumer credit (the vast majority of which is mortgages) stood at $6.3 trillion, just slightly below the private sector’s total, $6.5 trillion. As recently as 2006, the private sector far outpaced the government: $8.5 trillion to $4.4 trillion.
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