A Medici With Your Money

articles
Feb. 23 1997 3:30 AM

A Medici With Your Money

Fannie Mae's strategic generosity.

(Continued from Page 1)

Fannie Mae sports television ads depicting young couples, plucky immigrants, and others being helped by Fannie Mae. "Showing America a New Way Home" is the slogan. That is also the name of Johnson's recent book--a 175-page tract that pleads for still more subsidies while cloaking itself in high-mindedness. The book is a parody of Bartlett's, serving up quotes from Lincoln, Jefferson, and Roger Rosenblatt with equal pomposity. The cover shows Johnson, a bland-looking man in full business attire, on the porch of an all-American home that looks a tad too small to be his. The flag is conveniently draped in the background. The back jacket is crammed with bipartisan blurbs--from Jack Kemp to Vernon Jordan, Dianne Feinstein, and Ann McLaughlin, George Bush's secretary of labor. Acknowledgments are offered to any number of Washington big shots, including Slate's own Robert Shrum, who is thanked for his "considerable editing skills." Alas, the text could have done with more Shrum, who, let's hope, did not pen the line, "Home is about freedom."

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The book's subtitle is "Expanding Opportunities for Home Ownership." Johnson's idea of opportunity ranges from the unobjectionable--like giving banks better software for mortgage applications--to a bunch of new subsidies, many of which, sadly, Clinton and the Republican Congress may enact. The truth about government subsidies for real estate--including the granddaddy: the home-mortgage-interest deduction--is that they do very little to make housing more affordable. Part gets siphoned off by middlemen like Fannie Mae. Most of the rest melts away into higher real-estate prices. The main beneficiary of any subsidy for real estate is the person who owns the property at the time the subsidy is instituted, not the future buyer.

Fannie Mae, unfortunately, has become a model. There is Freddie Mac, Fannie Mae's smaller cousin in the housing market. And there is Sallie Mae (Student Loan Marketing Association), which creates a similar secondary market in subsidized student loans. Organizations combining public and private functions appeal to the woolly ideal of government-business partnership. They seem to represent a third way, a healthy distrust of government and the market, levelheadedness leavened by a kind heart. More often, as with Fannie Mae, what you get is the worst excesses of both.

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