Government Agencies Prolong the Pain in Housing

Ravi Nagarajan submits:

Reforms targeting Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) were not included in the Dodd-Frank financial regulatory act signed into law by President Obama last month. To many observers, this was a glaring omission given the fact that the two government sponsored entities have required massive injections of government funds currently totaling $145 billion and projected to rise much further. As The Economist described last week, government intervention in the U.S. mortgage market dominates home financing in a manner far exceeding typical government housing support in other developed countries.

As we have pointed out in the past, home ownership is not an inherently better choice for millions of Americans who require flexibility in their living arrangements. The fact that so many Americans are “underwater” and owe far more on their mortgages than the homes are worth has dramatically reduced labor mobility as the economy emerges from recession. A recent article in the Washington Post illustrates how mobility, once a major advantage for the United States economy, has been drastically curtailed by the housing crash.

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