Barney Frank: Missing the Lede on the GSEs

The headline, of course is that he is calling for the gradual elimination of Fannie Mae and Freddie Mac:

"I think they should be abolished," Frank said. "The only question is what do you put in their place. This is a situation where given the importance they had come to play in housing, you can't tear down the old jail until you build a new one. And that's a process that we've started."

This is legitimately a big news story, but the rest of his proposal is far more revolutionary. He is a calling for an end to government subsidies to home buyers:

Frank went on: "I have been very critical for a long time that not everybody should be a homeowner. There are people in this society who for economic and frankly social reasons can't and shouldn't be homeowners. I do want some government help to build affordable rental housing."

It's this 2^nd point that is a big deal. While the GSEs (Government Sponsored Entities) were a vanishingly small part of the housing bubble, as house prices exploded, their share of the market fell precipitously, what was a huge part of the market was the enormous subsidies made available to both home buyers, sellers, builders, and agents.

This distorted the market in some very profound ways, and it is very likely that if these measures had not been in place, we would have seen neither the bubble nor the crash.

We sacrificed our economy on the alter of home ownership.