Holman Jenkins uses his column today to recount some very useful history, namely federal interventions in the financial industry. He goes back to 1980 when Congress set the Savings & Loan disaster in motion by willy-nilly raising the deposit insurance ceiling from $40K to $100K. There have been plenty of other blunders since then. Especially important is the decision in Congress to give Fannie and Freddie a “mission” to support “affordable housing.”
That’s one of those slimy euphemisms that enable politicians to pull the wool over people’s eyes. They proclaim their support for something that sounds so nice (like “affordable housing”) so they have cover for doing all manner of things that enrich their special interest group allies.
Now, there are some areas of the country where housing is exceedingly expensive, but the reasons are rooted in state and local policies that severely limit construction and raise the cost of what can be built. The feds don’t do anything to change those fundamentals — nor can they. Housing in areas like San Francisco can’t magically be made “affordable” by incantations uttered by pols in Washington. All they can do is lure some people who had been renting very costly apartments into owning very costly houses. That was accomplished by undermining bank lending standards. And that policy, of course, wasn’t just for places where housing is very expensive. It was nationwide. The “affordable housing” crusade was putting people who should have kept renting into houses they couldn’t afford in high cost areas like S.F, low cost areas like Saginaw, MI, and everything in between.
The economic wreckage brought about by the political vision of having more people own homes is the latest manifestation of what I call The Curse of Visionary Politicians. I have an article by that title forthcoming.
