More than four years ago, President Obama assumed office promising dramatic reform to the housing market. After all, it was the housing market that triggered the financial crisis, and the vast proliferation of low-quality loans that had fueled the housing bubble. But politics delayed those reforms, and now the president is reopening the issue with a call to wind down the two main federal mortgage agencies, Fannie Mae and Freddie Mac. "For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag," the president said this week. "It was 'heads we win, tails you lose.'"
Well, not entirely. The U.S. government and taxpayers did rescue these agencies in 2009 (to the tune of nearly $200 billion), and, after injecting them with capital and essentially nationalizing them, these companies started to turn a profit as the housing market slowly recovered. This month, they contributed more than $15 billion to the U.S. Treasury, and have been one factor in sharply reducing government deficits.
Even more, Obama's targeting of Fannie and Freddie is part of a larger narrative -- on both the left and the right -- that banks and government colluded to produce the financial crisis and the continuing drag on the United States. To be fair, Obama in the same speech this week acknowledged that much of the housing crisis was the product of "banks and the government...[making] everyone feel like they had to own a home, even if they weren't ready and didn't have the payment." But that chord is a decidedly minor one in a general atmosphere of blame.