Op-ed: Status quo on housing finance keeps failed system in place

The following is an excerpt from a piece by Norbert Michel that was originally published by Forbes.

The status quo. It’s a powerful force in Washington, D.C. No matter how destructive or inefficient an existing program, institution or system may be, it’s always safer for politicians to maintain the status quo rather than meaningfully change direction.

Exhibit A: federal housing finance policy.

Prior to the 2008 financial crisis, the federal government spent decadesinstituting rules and regulations that ultimately dictated everything banks could do. Regulators even specified capital requirements that supposedly certified financial firms were safe.

On the eve of the crash, the federal government either insured or owned $6 trillion in home mortgages, with essentially zero capital in reserve in case anything went wrong. Nearly one decade later, we’re in an even worse position.

Today, financial institutions have even more rules; there’s a new regulator dedicated to making sure consumers are protected (even more) from paying off their debts, and taxpayers are explicitly on the hook for just about every new mortgage in the U.S.

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