Let the nation's housing markets clear

The bursting of the U.S. house price bubble during the third quarter of 2006, presaged the financial collapse of September 2008. Since then political meddling in the housing market has continued unabated.

Fannie Mae and Freddie Mac, major perpetrators of fraud during the bubble, are protected species, funded by unlimited taxpayer dollars. The Federal Reserve has purchased trillions of dollars of toxic mortgage securities in a futile attempt to prop up a falling market. Federal subsidies to underwater mortgage holders intermittently drip into the housing market. Clumsy bids to slow down the foreclosure rates provide unwarranted hope for households that have not made a mortgage payment in months, and have no where withall to make catch-up payments.

As a consequence, the housing market is failing to clear in significant sectors of the U.S. economy. The latest statistics indicate that house prices are falling again across 20 major metropolitan areas. Many economists expect such price declines to continue for the next several months. Some four years after the bursting of the bubble, the failure of the housing market to reach a new equilibrium is primarily due to political meddling. It is high time that the political elite should recognize that economic recovery will not return to trend until the false bubble is completely erased and a sustainable house price equilibrium is restored through market process.

The process is bound to be painful as homeowners lured into unsustainable mortgsges by the false promises of the likes of Barney Frank and Christopher Dodd retreat to the reality whence they came. Unfortunately, the penalties for political fraud are minimal. In other walks of life, Barney Frank and Christopher Dodd would be sharing prison cells with like-minded scam-artists such as Bernie Madoff. Unfortunately, the United States has become a nation governed by the rule of men, not the rule of law. And, as always in such circumstances, the men who rule are members of the political class

By Charles Rowley