Peter Wallison and Ed Pinto write,
While everyone has been watching Fannie and Freddie, the administration has quietly shifted most federal high-risk mortgage credit initiatives to FHA, the government’s original subprime lender. Along with two other federal agencies, FHA now accounts for about 60 percent of all U.S. home purchase mortgage originations. This amounts to more than $1 trillion and is rising rapidly.
So far, the government has lost very little money buying troubled mortgage assets through TARP. That is because TARP never bought many troubled mortgage assets to begin with.
Meanwhile, we have this huge expansion of FHA. Should taxpayers be high-fiving about TARP’s success if FHA winds up losing hundreds of billions instead?
READER COMMENTS
R Richard Schweitzer
Nov 30 2010 at 3:01pm
Were TARP funds used anywhere to buy, and thus own “toxic assets?”
This Kling comment is not very “Klingian.”
David Merkel
Nov 30 2010 at 3:06pm
And, don’t forget the losses at Fannie and Freddie, and other losses that the Federal Reserve will take before passing them quietly onto the Treasury as a reduction in Seniorage.
Mercer
Nov 30 2010 at 5:25pm
From the link:
” A first order of business for the new Congress should be to correct this error by requiring that the FHA and other government mortgage lenders abide by reasonable mortgage lending standards.”
If the new GOP House is really interested in limiting government spending they will follow this advice. I doubt they will.
It is no secret that most new mortgages have federal backing. The GOP would rather talk about tax cuts and earmarks then do anything that might hurt home prices.
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