Thomas Sowell - The Housing Boom and Bust

Comment: When some conservatives noted that the Community Reinvestment Act had some factor in the housing collapse, liberal commentators responded by saying that the CRA program and those that participated in it had very little default rates. While this is true, the point that is missed by liberal critics is that the CRA created a culture outside of the CRA program where "affordable" housing activists via progressive politicians effectively influenced financial regulators into pressuring banks to make more loans to less-than-creditworthy borrowers than they would normally be willing to risk. The political epitome of this is Mr. Barney Frank. He constantly pushed public policy to address a "housing affordibilty problem." The results of his work is the housing bubble and collapse.

Is a Bailout of the FHA on the Horizon?

This may come to pass soon:

WASHINGTON (AP) — The number of troubled loans backed by the government's mortgage insurance program is on the rise as economic problems mount, and lawmakers are worried that taxpayers will be stuck with the final bill.

Sen. Kit Bond, R-Mo., warned Thursday that the Federal Housing Administration is a "powder keg" waiting to explode, and said the Congress and the Obama administration shouldn't place a greater financial burden on the already strapped agency.

Defenders of the Community Reinvestment Act claim that since the CRA has low rates of defaults, due to a rigorous application process, it is therefore not to be blamed for the housing debacle. I always counter that the CRA has some defaults, albeit small, and that this is enough of a reason to question the merits of the program since taxpayers end up footing the bill for any losses no matter how small. I see the current dilemma with the FHA as being a very similar case as the CRA; good and noble intentions gone awry as the taxpayer foots the bill. BTW, this isn't the first time that the FHA has had financial issues.