Saturday, November 14, 2009

Cracks in the Foundation of the Fed's Housing Fix

Posted By: Sara Sindelar

We all know the government can't run anything.

It's not good at running the nation's retirement plan. Its passenger rail system seems to be perennially in trouble. If the post office were doing such a bang up job, how then would one explain the rise of FedEx and United Parcel Service?

And when it comes to creating efficient health care, let's just say "hoping for a miracle" is not a tried-and-true business plan.

Until recently, the same was true when it came to the housing and mortgage markets. Missteps by Fannie Mae, Freddie Mac, Congress and the Federal Reserve helped create the mortgage bubble.

But during the last 18 months, a funny thing happened. The government accomplished what it set out to do. Uncle Sam's extraordinary efforts to prop up the financial markets, the mortgage market in particular, pretty much have worked. Housing prices in most places have stabilized. Home loans are being made to qualified borrowers, not at the bubble-era pace, but at a healthy rate that has deals getting done.

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