Waking up from the American dream

Looking to shore up the market for home loans, the Obama administration on Tuesday held a conference on fixing the system at the heart of the credit crisis. Some Republicans want to get rid of the massive government-backed lenders Fannie Mae and Freddie Mac, while bond-market guru Bill Gross suggests nationalizing the system entirely, pointing out that the government can lend at lower rates than private banks. But according to Housing and Urban Development Secretary Shaun Donovan, the government — which through Fannie, Freddie, and federal housing insurance currently stands behind nine of 10 U.S. mortgages — is starting to scale back its role in the mortgage market. Will this make mortgages more expensive — and would that threaten the American dream of owning a home? (Watch a Fox Business discussion about the declining American dream)

Fixing the system may dim the American dream, but it must be done: Fannie Mae and Freddie Mac "need to go," say the editors at Reuters. The trouble is, "the American dream of home ownership," which politicians told Fannie and Freddie to promote by keeping mortgages cheap, "makes tackling them a politically difficult task." But the only way to put the real estate and credit crisis behind us is to stop encouraging people to take out loans they can't pay back.

"Waking up: Fixing mortgage finance and the American dream"

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Smashing the dream of home ownership would be a disaster: There's no question we need housing market reform, says Daniel Indiviglio at The Atlantic, but "walloping" Fannie Mae and Freddie Mac, or restricting federal loan guarantees, will only drive home prices down further. We should push through legislation to prevent irresponsible lending in the future, but have the changes take effect gradually.

"Is the housing market too fragile to endure reform?"

The dream is part of the problem: "For decades, buying a house was seen as the ultimate socio-economic accomplishment," says Barbara Kiviat at Time. But the real estate collapse has demonstrated that this probably isn't "the way we want the American psyche oriented." We plow 18 percent of GDP into housing, but if we spent the money on education or job creation we'd have a better chance at actually achieving the American dream, which is supposed to be about equality and "living in a land of social and economic opportunity where talent and hard work can take you places" — not just buying a house.

"The bastardization of the American dream"