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April 05, 2005
Conservatives: Three Cheers for Fannie and Freddie!
One might expect that conservatives, who claim fealty to the Constitution and to the idea of limited government, would oppose Fannie Mae and Freddie Mac, government-run agencies that provide low-interest mortgages. Can anyone find any constitutional justification for such agencies, let alone moral justification?
As a matter of fact, someone can. That someone is Jeffrey Mazzella, president of the Center for Individual Freedom. Writing at CNSNews.com, a site formerly known as the Conservative News Service, Mazzella urges Congress not to attempt any radical reforms of Fannie and Freddie (and certainly not to eliminate them, not that there is any danger of that) because
While we are by no means a fan of big government, practically speaking, there is a limited role for government to play in the housing and banking markets to ensure the dream of home ownership comes true for even more Americans.
Really? Since when did government-subsidized mortgages become a conservative principle? What does this have to do with individual freedom?
Mazzella argues:
The impact these two companies have on the housing and construction markets is tremendous, and considering that the housing sector led the current economic recovery, it wouldn't be wise to tinker too much with the very companies that provided that much-needed financial boost.
Fannie Mae and Freddie Mac have successfully developed a secondary market in fixed-rate, long-term home mortgages and consumers are better off for it. Many credit these two housing giants for lower rates that help make home ownership possible for some 70 million American families.
Now Mr. Mazzella, if the consumers in question were unable to obtain these loans, what would happen? Well, they would either have to pay higher interest rates or rent until they could afford to buy a house. Meanwhile, the increase in demand created artificially by the goverment's loans means that housing prices are higher than they otherwise would be, which in turn means that other home buyers (a) are forced to pay higher prices than they would in the absence of Fannie and Freddie and (b) at the same time may have to bail out Fannie and Freddie in the event of loan defaults, either by tax increases or inflation.
Conservatives once claimed to be hard-headed thinkers who understood economics and the unseen effects of government policies. Those days, if they ever existed in the first place, are long gone. As long as Republicans are in charge of government, it's full speed ahead.
Posted by Mike Tennant at April 5, 2005 01:51 PM
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