Barney Frank Belatedly Gets Religion on Fed Support of Home Ownership

Representative Barney Frank has apparently ended his decades long support of federal control of the US housing market through Fannie Mae and Freddie Mac. The money both of these institutions indirectly provided to unqualified home buyers over the years are at the heart of why we are in midst of significant housing price deflation.

"They should be abolished," Frank said in an interview on Fox Business, when asked whether the mortgage giants should be elements in housing market reform. "They only question is what do you put in their place," Frank said.

The Federal Housing Administration should be fully self-financing and Freddie and Fannie should be replaced with a new mechanism to help subsidize housing, Frank said in the interview.

"There is no more hybrid private-public," the Massachusetts Democrat suggested. "If we want to subsidize housing then we could do it upfront and let the budget be clear about that."

Fannie and Freddie Mac were government-sponsored enterprises, privately owned companies supported by the government, until the Bush administration took control of the companies in 2008 to save them from collapse."

The size of both of these institutions is unbelievable.

"Together, Fannie and Freddie and the Federal Housing Administration now back 90 percent of new U.S. home mortgages."

Frank was particularly blunt in attacking some of the policies that over the years have seen Fannie and Freddie gain such significance.

"In the Fox Business interview, Frank also was critical of public policy that promoted homeownership at any cost. He also said the federal government should not be a "backstop" in guaranteeing mortgages.

"There were people in this society who for economic and, frankly, social reasons can't and shouldn't be homeowners," Frank said. "I think we should, particularly, stop this assumption that you put everybody into homeownership."

It will be interesting to see if Frank is engaging in some pre-election grandstanding, or if he truly believes what he is saying.

The sooner the federal government moves away from providing home ownership support, the better off all taxpayers will be.

In point of fact, it has never been clear how federal involvement in the housing market can be squared with the limited role the federal government is granted by the US Constitution.