The WaPo finally realizes the root cause of the subprime crisis

The Washington Post had an article about the roots of subprime mortgage crisis which was the paper's website's headline in the morning, and has gradually been pushed lower and lower on the page to the point where now it's not even on the front page of the website. Anyway, the article puts the blame on the government's distortionary activity within the mortgage markets. Beginning around the year 2000, as part of Bush's "ownership society," federal agencies like began aggressively purchasing subprime mortgages, effectively creating a market for them where they otherwise did not exist. Agencies like FHA and HUD, and pseudo-private agencies like Fannie Mae and Freddie Mac, were the government's tool to manipulate the market for mortgages, and manipulate it they did: 40% of all mortgages are financed by lending companies Fannie Mae and Freddie Mac, which hold $5.3 trillion in outstanding debt, and receive tax breaks (read: subsidies) to the tune of $6.5 billion a year.

Part of the irony of Bush's "ownership society" is that it requires taxpayers to fund it. While on its face home ownership might seem like the paragon of private property and private ownership, it's really not in very high demand in the actual free market. While America does indeed have very high rates of homeownership, it's in spite of the market, not because of it. I can't find the statistic at the moment, but I remember reading that only 10% of all Americans owned their own homes in the beginning of the twentieth century. After WWII, mortgages subsidized by the VA (which accounted for, I believe, over half of all mortgages) became the primary vehicle for the widespread fleeing the white middle class from rented apartments, and into the suburbs. These subsidized mortgages were often cheaper than rent, despite the fact that renting doesn't give any permanent rights to the property, while mortgage payments due – a dead giveaway that the proposal was anti-market. After the immediate post-WWII era, homeownership was encouraged with the mortgage interest tax write-off, and the surfeit of lots zoned exclusively for single-family homes, regardless of what the market might actually demand in those locales. The aforementioned federal agencies and pseudo-private corporations also play a role, extending subsidized mortgages to people in the name of encouraging homeownership, which politicians and pundits have for some reason deemed a better option than renting. And, to complete the picture, most recently those left behind from the subsidies – the poor, and especially poor blacks – have had their incentives manipulated through subprime mortgages, increasing (at least temporarily) their rates of homeownership. Only, while in the past the government accounted for the full cost of this subsidy, during the subprime crisis, all the government did was allow the mortgages to be made, but isn't going to be left holding the bag when the payments don't come.