Who Fails to Comprehend?
By Arnold Kling
I would have hoped to have more comprehension from a candidate at a time when the estimate of a resulting $300 billion taxpayer liability is viewed as plausible.
He is referring to Republican VP candidate Sarah Palin’s suggestion that Freddie Mac and Fannie Mae have gotten too big and need to be shrunk.
Far be it from me to defend Palin’s wisdom, but I don’t see what’s wrong with what she is saying. On the other hand, this is hard for me to fathom.
In the House, Mr. Frank, the chairman of the House Financial Services Committee, criticized the administration’s attempt to shrink the companies. He staunchly defended the companies’ ability to channel some of their profits from conventional mortgage financing to subsidize the construction of affordable rental housing and lower borrowing costs for low-income home buyers.
I’m sure that Congressman Frank is aware that we have an agency, called the Federal Housing Administration (FHA), that serves the function of providing subsidized loans to borrowers who cannot obtain mortgages in the private market. We have other programs that subsidize the construction of homes.
In the United States, we have a huge inventory of unoccupied homes. We have trillions of dollars of mortgage debt. We need a government-sponsored enterprises to encourage more homebuilding and more debt about as much as we need a government enterprise to stimulate teenagers to want more sex.