For those not busy fleeing or fanning the flames of the Ground Zero mosque controversy, the week's big political event was a conference at the Treasury Department about the future of housing finance. Washington will soon make some big decisions that will go a long way toward determining who gets to own a house and how much they'll have to pay for it.
More than any other sector of the economy -- even banking or automobiles--the federal government dominates housing. After the collapse two years ago, it rescued the housing market by essentially nationalizing the mortgage giants Fannie Mae and Freddie Mac at a cost to taxpayers of $148 billion and counting. Today, Wall Street is back on its feet and automakers like GM are turning a profit. But government agencies still back 95 percent of new mortgages.
That's not ideal for anyone. Critics who prefer private markets fault the Obama administration for its continued involvement, while the bailout-weary White House would like nothing better than to satisfy them. But figuring out how government should extract itself and how the system
should be remade is a challenge so daunting that it was left out of the financial reforms that President Obama recently signed into law. Along with difficult questions of policy, overhauling the $11 trillion mortgage market involves confronting the most charged political issue in Washington: the proper size of government and its role in the economy. This is what a group
of luminaries from government, business, and academia undertook at the Treasury.