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Obsessive Housing Disorder
...By pushing for lax lending standards, encouraging government enterprises to make mortgages more available, and leaning on private lenders to come up with innovative ways to lend to ever more Americans—using “the mighty muscle of the federal government,” as the president himself put it—Bush had lured millions of people into bad mortgages that they ultimately couldn’t afford, the Times said.

Yet almost everything that the Times accused the Bush administration of doing has been pursued many times by earlier administrations, both Democratic and Republican—and often with calamitous results. The Times’s analysis exemplified our collective amnesia about Washington’s repeated attempts to expand homeownership and the disasters they’ve caused. The ideal of homeownership has become so sacrosanct, it seems, that we never learn from these disasters. Instead, we clean them up and then—as if under some strange compulsion—set in motion the mechanisms of the next housing catastrophe....

...Washington’s, indeed America’s, housing obsession—decades of government and advocacy-group efforts to water down underwriting standards, private mortgage makers’ desire to find new pools of customers as homeownership rates rose, and the rapid growth of securitization of risky loans—carried a steep cost. When the Federal Reserve added low interest rates and plenty of financial liquidity to the mix, the housing boom became a bubble. And then, as everyone knows, the bubble burst in 2008, leading to economic disaster.

Last year, lenders began foreclosure proceedings on some 2.3 million homes, and some experts have predicted that when the current financial crisis has ended, some 8 million homes will have wound up in foreclosure. Though lenders made risky loans to borrowers across the income spectrum, many of the failing mortgages today are in lower- and lower-middle-income neighborhoods. A Federal Reserve Bank of New York study of foreclosures in New Jersey, the state in its region hit hardest by the mortgage collapse, reveals that zip codes with the worst rates are mostly in areas where household income was “concentrated at the lower end of the household income range.”

Yet before we’ve even worked our way through this crisis, elected officials and policymakers are busy readying the next. Barney Frank, the Massachusetts congressman who serves as chair of the House Financial Services Committee, has balked at proposals to privatize Fannie Mae and Freddie Mac, which would eliminate their risk to taxpayers and their susceptibility to political machinations. Why? Simple: the government uses them to subsidize the affordable-housing programs that Frank supports. California congressman Joe Baca, head of the Congressional Hispanic Caucus, also opposes reining in affordable housing lending. “We need to keep credit easily accessible to our minority communities,” he asserts. ...