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Building castles of sand
BANKERS, frauds, predatory insurers: there has been a stampede to punish the villains of the global meltdown. Yet one culprit is not only rarely seen as an offender, but is also being cosseted and protected. Governments’ obsession about home ownership has contributed as much to the meltdown as any moustache-twirling financier.

The bust began in America’s housing market and soon spread to government-sponsored institutions created to increase home ownership, Fannie Mae and Freddie Mac. Part of the problem came about because of policy. In most rich countries the state subsidises private housing. Some places (America, Ireland and Spain) give tax relief on mortgage-interest payments. Others, such as Britain, eliminate or lower the tax on capital gains from sales of someone’s main house. Still others use state-backed outfits to direct credit to housing or to make it easier for first-time buyers or the poor to buy their own homes. Subsidies are not to blame for everything—the housing bubble affected a range of markets regardless of how much they were subsidised—but the distortions aggravated the boom and bust by making housing artificially attractive....