Abolishing the Housing Welfare-regulatory Apparatus
By Alex Epstein (Wall Street Journal, September 16, 2008)

Bert Ely is right that the Fannie-Freddie implosion "must spark fundamental rethinking about how best to finance American home mortgages." But while his proposals, such as "covered bonds," may have some merit, he misses the fundamental point.

Decisions about how best to finance mortgages should not be made by politicians or by editorial page columnists -- they should be made by individuals in a truly free mortgage market, where lenders are free to lend as they choose and reap the full consequences of their decisions. The problem with the current system is not that borrowers and lenders have been unaware of more sensible financing options, but that implicit bailout guarantees have made reckless, shortsighted lending options more appealing. Abolishing the housing welfare-regulatory apparatus is the only "fundamental reform" that will do.