Blogging for Reuters on August 9, Zachary Karabell, identifies the cultural imperative that fueled The Great Financial Crisis of 2008: the desire of individuals to own their own homes.  Karabell makes the point that government policy and business practices helped facilitate the realization of home ownership, but the desire for owning a place to live, rather than living as a tenant, has been a feature of American existence since the first European colonists waded ashore in the New World.

He also argues in favor of "reforming" mortgage giants, Fannie Mae and Freddie Mac, by improving how they do business, rather than by tearing them apart:

"Blaming venal banks and inept government will not transform our system, however satisfying it may feel. Shuttering Fannie and Freddie will not force a shift in people's desires, though it will make it harder for banks to prey on those desires. Ending the government guarantee of mortgages via these agencies will lead to tighter credit standards, and hence less access to credit for those less well-off. That may be for the best, but it is hard to see that not generating backlash. Rather than unwinding these agencies, we should focus on those lending standards, and when they should be relaxed and when not."

Karabell's point about access to mortgage credit becoming more limited, is shared by many knowledgeable observers. Predictions about how legislative assaults on Fannie and Freddie will dry up the pool of capital available for mortgage lending, echo concerns expressed by many other writers, over the foreseeable impact on mortgage lending of new regulations from the CFPB.

The August recess is a time when senators and representatives tour their districts. Constituents of the Congressional sponsors of legislation intended to "fundamentally transform" the mortgage lending industry should take a moment and read Karabell's blog post, if for no other reason than to be able to ask their elected representatives meaningful questions at town hall meetings.

What do you think?  Should the government reform Fannie and Freddie or shut them down?

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