While in China, I wrote about the GOP and housing policy (naturally) for my Friday Daily column:

As the president’s support among non-college-educated white voters continues to plummet, his advisers seem to have written off swing states in the Midwest. This makes Nevada, Arizona and Florida, which have growing Hispanic electorates, even more crucial to his re-election strategy. Recently, the Pew Hispanic Center reported that Hispanic household wealth plummeted 66 percent from 2005 to 2009. Most of this staggering decline can be traced to the fact that a disproportionate share of Hispanics reside in regions hard-hit by the housing bust. While political observers tend to fixate on how the debate over immigration shapes the preferences of Hispanic voters, the question of what to do about home prices is at least as important.
That is why it is a serious mistake for the Republican presidential candidates to be so cavalier about the prospect of throwing a lifeline to families with underwater mortgages. So far, the main thing Mitt Romney has said about giving these families relief is that “the right course is to let markets work,” and Herman Cain has said much the same. Yet the government already exerts a staggering level of control over the housing market. Today 90 percent of new mortgages are underwritten by Fannie Mae, Freddie Mac and the Federal Housing Administration, the so-called government-sponsored enterprises.
To really let markets work, we’d first need to perform radical reconstructive surgery on U.S. housing policy. Among other things, we’d need to strip away the mortgage interest deduction, an enormous subsidy that encourages Americans to buy more expensive homes or choose homeownership over renting. We would also need to phase out Fannie and Freddie and replace them with either targeted homeownership subsidies or nothing at all.
Both of these steps are smart moves over the long term. They’d encourage a shift from investment in housing toward investment in America’s productive potential. Yet they would also deliver a huge blow to home prices, which isn’t likely to go down well with swing voters.

With that in mind, I urge reconsideration of the Zingales-Posner proposal. The authors described it in detail back in 2009, and I recommend checking it out. It strikes me as a proposal that reflects important conservative priorities — no bailouts, no new taxpayer money, apart from administrative expenditures, and it reflects the virtues but not the drawbacks of the bankruptcy process.