No one wants to return to the old system, in which Fannie and Freddie -- ostensibly private enterprises -- kept profits for themselves and stuck taxpayers with losses. But beyond that, there is little agreement. Liberals tend to support government intervention as a means of subsidizing homeownership for the poor and middle class; most conservatives would prefer to let private markets take over.

In theory, the U.S. could go the way of most European countries and stop guaranteeing mortgages altogether, thereby protecting taxpayers from budget-busting losses like the ones just incurred here. (Subsidies to advance homeownership among the poor could be delivered directly.) This would force banks to absorb the interest-rate and credit risk from their loans, but the added risk would be passed along to borrowers in the form of higher rates, and could even put an end to the traditional 30-year fixed-rate mortgage -- the foundation of the U.S. housing market, although it is rare in other countries.

Would Americans accept such a radical change? Republicans sure don't seem to think so. Although many argued loudly (and rather speciously) that government interference in the mortgage market was the primary cause of the financial crisis, they have mostly fallen silent since winning control of the House last fall; legislation to abolish Fannie and Freddie has languished.

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