by Norbert J. Michel, John Ligon
The Heritage Foundation
November 07, 2013
The notion that the housing finance system in the U.S. worked until banks foreclosed on millions of homes is inaccurate. The federal government has supported the U.S. housing market through subsidies in the mortgage and secondary mortgage market for more than 80 years. Even during normal housing markets, these subsidies in the housing finance system—largely flowing to Fannie Mae and Freddie Mac—have cost the federal taxpayer billions of dollars. These federal subsidies have done little to measurably increase homeownership in the U.S., yet they have cost the federal taxpayer billions of dollars, enriched politically connected financial institutions, and undermined homeowners in a profound way at points when the housing markets collapsed. After decades of experimentation, Congress should shut down Fannie Mae and Freddie Mac as soon as possible because they are a key part of a failed housing policy.