The housing crash: a Democratic scandal?

As the old man's Presidential campaign mutters along, and John Ensign would be thrilled to only lose a handful of Senate seats, and Republican hopes look generally bleak, Republicans should mine the rich material of the housing bubble.

As housing prices continue to plummet through the summer and fall, the housing bubble and crash and ensuing economic fallout is sure to rank high on the list of issues in voters' minds. And so far, it appears to be an overwhelmingly Democratic scandal:

* Fannie Mae is at the heart of the problem for using its government-sponsored status to guarantee billions of dollars in bad loans that never should have been made. Fannie Mae's guarantees helped kick off the easy-credit lending spree that created the bubble. Fannie Mae is essentially a personal enrichment vehicle for Democratic functionaries like Franklin Raines and Jim Johnson, who became obscenely wealthy by being appointed to lead the government-sponsored enterprise. Fannie Mae will likely require a massive taxpayer bailout as more loans continue to go bad.

* Housing bubble poster boy Angelo Mozilo of Countrywide had a "Friends of Angelo" program where he gave mortgage discounts to legislators and policymakers, the overwhelming majority of whom are Democrats, including Senator Chris Dodd, Senator Kent Conrad, and the aforementioned Jim Johnson. The highest-profile Republican named in the scandal so far is already-disgraced ex-HUD Secretary Alphonso Jackson. These special loans appear to be a clear violation at least of Congressional ethics rules, if not of laws.

* Foreclosure Queen Laura Richardson, Democratic Congresswoman from Long Beach, defaulted eight times on three houses, and is now being sued over a very fishy rescinding of a foreclosure. Special treatment, anyone?

From a policy substance perspective, it's clear that liberal (i.e. expansionist goverment) policies contributed to the bubble. "Affordable ownership" programs threw credit standards out the window and had the perverse effect of driving housing prices to levels that were far from affordable. The solution is a return to a private market where the lenders bear the risks of the loans they make (yes, securitization and sale of loans to foolish third parties was also a huge problem, but the buyers have wised up to that!). Over time, houses will return to prices where average families can afford them with a 20% down payment and a 30-year, fixed-rate loan.

To be fair, Bush's "ownership society" push and related actions at HUD contributed to the bubble. But Bush is on his way out. It would be nice to send the corrupt Fannie Mae and some Congressional Democrats with him.