Bad lending and bad mortgages conspired with Wall Street stupidity to crash the American financial system. But, amazingly, no fix of the mortgage financing system has been proposed.
Now President Barack Obama is taking on the mortgage-finance morass, and he's reached out to like-minded Republicans in a bid for reform.
Mr. Obama wants gradually to shut down Fannie Mae and Freddie Mac, the two government lending programs. He says taxpayers should never again be left "holding the bag" for their costs. He also says most mortgage lending should come from private lenders -- an old-school GOP position.
The president also wants the federal government to insure private loans and regulate home loans. These are classically Democratic positions.
Competing versions of reform legislation are before Congress. One would abolish Fannie Mae and Freddie Mac. The other would do what the president wants to do -- dismantle them and replace them with regulation that includes both carrots and sticks.
Liberals seek reassurance that a mortgage finance system led by the private sector would still ensure broad-based home ownership and continued access to traditional, popular 30-year mortgages that stretch out payments.
But such legislation would be a bad idea. Reform should get government out of home loans, not retain it as the man behind the curtain. The feds should regulate, not control outcomes.
Home ownership is a plus for many Americans, but not all. It is not a panacea, and government cannot manufacture a market and a result. If there is no profitable market for 30-year mortgages, it should not be created.
At the same time, mortgages always will have to be insured and lenders always regulated. Mr. Obama is right to move lending back to a market that has rules but is essentially private.