America’s taxpayers shoulder too much housing risk

IMAGINE how worrying this month’s stockmarket turbulence would have been had taxpayers been on the hook for any losses. Fortunately, the government does not guarantee shares. But there is an asset class that is also vulnerable to changes in sentiment and interest rates and which Uncle Sam does stand firmly behind: housing. In 2017, through entities such as Fannie Mae and Freddie Mac, the Treasury guaranteed 70% of all new mortgage lending. The taxpayer’s total exposure to housing is enormous, at over $6trn, or 30% of GDP, but it is hidden off the government’s balance-sheet. Reform is long overdue.