President Obama visited Phoenix, Ariz., on Tuesday to tout his administration's alleged progress on housing policy. Unfortunately, the housing sector's modest recovery is due almost entirely to the cheap money policies of the Federal Reserve. By contrast, Obama's housing policy interventions have been disastrous. Recall, for example, that in February 2009, Obama spoke in Mesa, Ariz., on the housing crisis, promising that his then-forthcoming Home Affordable Mortgage Program would help "between seven and nine million families" stay in their homes.
A little over four years later, HAMP was exposed as a flop by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Just 1.6 million households had actually received HAMP assistance, seven million fewer than Obama promised in February 2009. Worse, many of the HAMP-assisted households ended up defaulting again. As of March 31, according to SIGTARP, 46 percent of the oldest HAMP modifications re-defaulted, compared to 37 percent of the more recent beneficiaries. Many homeowners would have been better off without HAMP, according to SIGTARP: "Re-defaulted HAMP modifications often inflict great harm on already struggling homeowners when any amounts previously modified suddenly come due."
Nobody should be surprised. After all, former Treasury Secretary Timothy Geithner allegedly admitted that Wall Streeters, not homeowners, were the intended beneficiaries of HAMP. Former SIGTARP Neil Barofsky claimed in 2012 that Geithner told him HAMP was designed to "foam the runway" for Wall Street banks by "stretching out foreclosures, giving the banks more time to absorb losses while the other parts of the bailouts juiced bank profits."
So middle Americans have every right to be suspicious when Obama says his newest round of policies will make homes more affordable. When Obama reappointed Ben Bernanke, it meant a continuation of the Fed's monthly creation of $80 billion in new money, most of which has gone directly into asset appreciation, particularly home prices. This is great news for wealthy homeowners in choice markets like California and New York, but for middle-class Americans everywhere it only means higher home prices.
To his credit, Obama spoke positively Tuesday of at least beginning to roll back the government-sponsored disasters known as "Fannie Mae" and "Freddie Mac." These two entities, plus the Federal Housing Administration, now guarantee more than 90 percent of all new home mortgages. But while Obama expressed mild interest in reducing the federal government's role in the housing sector, he also insisted that the government must ensure that Americans will always be able to buy 30-year, fixed-rate mortgages.
Why? No other country on the planet has a housing market dominated by 30-year fixed mortgages, and many countries that have no long-term mortgage market at all, like Canada, avoided the 2008 housing bubble and financial crash entirely. There is simply no reason why America should repeat the same housing policy mistakes of the past. But for reasons that aren't immediately apparent, that appears to be pretty much what Obama is determined to do in his remaining years as president.