The Fatal Conceit of the Government Mortgage Complex

By Norbert J. Michel, Director, Center for Data Analysis at The Heritage Foundation.

Debate over housing finance reform has raged for ten years. A favorite argument of those wishing to preserve some version of Fannie and Freddie has been: Without Fannie and Freddie, there is not enough private capital to sustain the housing market.

This line puts free-market conservatives on the defensive. After all, who could possibly argue for getting rid of these two government-sponsored enterprises (GSEs) without first determining what will take their place?

It’s a trap, of course. Free-market conservatives loathe the idea of designing a housing finance system. They want to let one develop. Letting bureaucrats design the housing finance system is exactly what led to (among other problems) the 2008 financial crisis.

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*This article originally appeared in Forbes. Click here to view.

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