Opinion
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Don't reinflate the housing bubble
By: Michael Barone
Senior Political Analyst
10/17/09 1:46 PM EDT
Our financial system broke down because we had, thanks to government policies, a housing bubble. So what is the response of Democratic policymakers? Inflate the housing bubble again. For intelligent descriptions and denunciations of this lunatic policy, read my American Enterprise Instutute colleague Peter Wallison’s October 16 piece in the Wall Street Journal, provocatively headlined, “Barney Frank, Predatory Lender,” and Charles Lane’s October 18 piece in the Washington Post, unprovocatively headlined “Doubling Down On the Wrong Housing Policy.” Wallison and Lane come from different points on the political spectrum; Wallison was a top aide in the Reagan White House and Lane was editor of the New Republic. But they’ve both got the same correct idea. Policymakers of both parties tried to increase home ownership and managed to raise it from 64% of households to 69%. But that proved to be too much. The defaults resulting from encouraging mortgages for non-creditworthy borrowers nearly destroyed the financial system and plunged us into a deep recession. Home ownership is down to 67% and falling. We should let it continue to fall. We’ve had about as good a real-world experiment with public policy as you can get in this messy world, and the intelligent conclusion is that 64% is about the right number. Let’s not make the same terrible mistake twice.
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