Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance

Viral V. Acharya, Matthew P. Richardson, Stijn Van Nieuwerburgh and Lawrence J. White are professors at the New York University Stern School of Business and the authors of “Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance.”

They write in the New York Times today:

“THE United States spends more than $100 billion annually to subsidize homeowners. Renters get no breaks; homeowners get tons of them. Their mortgage rates are subsidized through the government-sponsored enterprises Fannie Mae and Freddie Mac; they get a big deduction on federal income taxes for mortgage interest payments and for state and local property taxes; and they even get favored treatment on capital gains from the sales of primary residences.”

These are good points. I’ve always been a renter and probably always will be a renter. Why should homeowners get the subsidies but not me? Why should mortgage interest be tax deductible but not the interest I pay on my credit cards?

Subsidies for home ownership were until now untouchable but these subsidies have proved to be a disappointment for both sides of the political spectrum.

Subsidizing home ownership allowed people to buy more home than they could afford. This led to the housing boom and then to the housing crash.

With reduced subsidies for home ownership, Americans will take on less debt. They will be more prudent in their home purchases.

Capital will be allocated more efficiently without these subsidies and the American economy will become stronger.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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