In a WSJ piece called No Easy Exit for Government as Housing Market’s Savior

…the article notes that

After a year of extraordinary interventions in the economy, the federal government is starting to pare its support for the private sector.

except for housing…

  • 80% of new mortgages benefit from government support
  • The $8,000 first time home buyers tax credit
  • The Federal Reserve has worked hard to keep interest rates at or near historic lows

“At least for the next two years, and possibly longer, it is not possible that the government would say: ‘The U.S. mortgage market no longer needs our support,'” says Dwight Jaffee, an economics professor at the University of California Berkeley’s Haas School of Business. “Were they to say that, the mortgage market and the housing market would almost surely crash.”

The article does seem to suggest that the government should rethink its stance on housing.

Promoting homeownership has been a stated goal of Republican and Democratic presidencies for decades. The Obama administration recognizes it will need — at some point — to rethink broadly the government’s role in housing and mortgages. Administration officials also acknowledge that moment won’t come soon.

Good grief – it’s not housing that is the problem – it’s credit. That’s where the focus should be. Both parties and government regulators help foster the environment the ultimately imploded. The housing boom was merely a byproduct.

It could have been gemstones or pet rocks. Let’s not confuse stupid credit policy with housing.

That’s why it is bitterly disappointing to see the momentum gone for real regulatory reform for financial services. The same regulators and executives remain at the helm.

It’s amazing how the passage of time makes the current credit environment somehow not seem broken. Not much has changed in the mortgage lending process to enhance the safety of the financial system.

Of course there are always gemstones.

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