David Wessel of The Wall Street Journal has been thinking about the country's home ownership system. He wants some rethinking, as a matter of fact, and he's here to tell us about it.

Welcome back to the program, David.

Mr. DAVID WESSEL (Economics Editor, The Wall Street Journal): Good morning.

INSKEEP: Let's just remember the basics, here. The government, for quite some time - for generations, really - has encouraged more home ownership. It's supposed to be good for people, supposed to help people get out of poverty, as a matter of fact, help them save. What's wrong with that thinking?

Mr. WESSEL: It didn't work. We basically went, as a society, where 65 percent of the people owned homes to one where nearly 70 percent of the people owned homes. And it turned out a few of those people - many of them, actually - in that last bump couldn't afford the houses, especially when the value started to fall. They couldn't pay their mortgages. So now we have a system where a lot of people own homes, but don't have any equity in them, which means you don't get any of the virtues of the investment. And the government has been forced to basically take over the mortgage financing system, which suggests that it wasn't a very strong one if the government has to take it over.

INSKEEP: Is it felt, David Wessel, that it's proven now that there was a cause and effect, that encouraging homeownership to a wider range of people and more marginal people is actually, what is it, the bottom of the financial crisis?

Mr. WESSEL: I wouldn't say there's a consensus about that. There is a strong case to be made that one of the factors that led to the financial crisis was pushing so hard to get people into homes without thinking hard enough about whether they could pay them back. And when that met a financial system, banks on Wall Street that were looking for any way to make securities and make money, that that was a combustible combination and the government failed to stop it. So I think it was a major cause, not the only one.

INSKEEP: So what are the options now?

Mr. WESSEL: Well, the question is: Is there something the government could do differently that would make us less susceptible to something like this again? You might, for instance, say, as a nation, we just overdo it on homeownership. Why doesn't the president of the United States ever get up and say you can be a full-fledged American citizen and rent an apartment, it's okay? That's not what presidents have traditionally said.

We could do away with the tax deductions on mortgage interest, which saves Americans a hundred billion dollars a year, and that would discourage people from putting so much money into housing and putting it - the money into some other kind of savings that might be more productive.

INSKEEP: In places like New York, where there's a lot of rentals, people actually say, actually, let's just give us the tax deductions for rental income.

(Soundbite of laughter)

Mr. WESSEL: Right.

(Soundbite of laughter)

INSKEEP: Rental payments.

(Soundbite of laughter)

Mr. WESSEL: Yeah, doesn't help the deficit. But, you know what? Doing away with the tax deduction on mortgage interest is one of those things that economists talk about and politicians just aren't going to do any time soon because it's so popular. So I think, for now, we're just doing a lot of tweaking. We're saying that we're going to have - that Congress is going to create a new consumer finance industry that will change the rules a little bit so you get fewer mortgages made to people who can't afford them.

The Federal Reserve has changed some of its rules to discourage the worst of the subprime lending. They're going to change the rules for securitization so it's less attractive to make a mortgage to someone who can't pay it, because someone else will get stuck with the bill if they can't.

But, for instance, in the big financial regulatory bill, they haven't done anything with Fannie Mae and Freddie Mac, with the housing agencies that are the biggest cost of the bailout to taxpayers. And they haven't yet come up with a new way to run a mortgage finance system.

INSKEEP: We've just got a couple of seconds, but you said about 70 percent home ownership. How does that compare to other countries?

Mr. WESSEL: Well, it's down to about 62 percent now. Basically, in other countries, it varies a lot. But there are countries like ours, where people own a lot of houses - Canada, Spain, Ireland - yet the government doesn't subsidize it so much and they don't have this fixation with the 30-year fixed rate mortgage. So the question is: Could we get as much home ownership as we want without spending so much taxpayer money to get it?

INSKEEP: David, thanks very much.

Mr. WESSEL: My pleasure.

INSKEEP: David Wessel, economics editor of the Wall Street Journal.

Copyright © 2010 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.