Joe Nocerra Calls Republican Fannie/Freddie Bluff.

The problem the Republicans want to fix is the two government-sponsored entities, Fannie Mae and Freddie Mac. Without question, Fannie and Freddie need fixing. A week before Lehman Brothers collapsed in September 2008, both entities were so troubled that they had to be taken over by the federal government. Since then, the G.S.E.’s, as they’re called in Washington, have cost the taxpayer around $150 billion in losses, far more than, say, the American International Group.

They have also, though, served a critical purpose. With the private mortgage market essentially broken, virtually every mortgage made in America, postcrisis, has required a guarantee from Fannie, Freddie or the Federal Housing Administration. With the banks unwilling to make mortgage loans on their own, you simply cannot buy a house in America today without Fannie and Freddie’s help...

The incoming chairman of the House Financial Services Committee, Representative Spencer Bachus of Alabama, has vowed to make reform of the G.S.E.’s his top legislative priority, ending “once and for all the disastrous government experiment in privatized profits and socialized losses.”

Without question, this is a laudable goal... Fannie and Freddie, they [Republicans] say (implausibly) in a recent position paper, “were the proximate cause of the financial crisis” and “at the forefront of a relentless push to drive down lending standards,” etc. etc.

The solutions they offered were nice-sounding but impractical — “Re-establish a housing financial market that has long-term stability in which private capital is the primary source of mortgage financing” — and utterly in denial about the fact that it’s the private market that has gone AWOL. Just as the market failed during the bubble, so it is now failing again.

I’m all for reforming Fannie and Freddie. Who isn’t? But at this stage of the game, you can’t reform the G.S.E.’s without reforming the private market too. That may not be where the Republicans’ theory of the case takes them. But it happens to be true. [at the nyt, subscription rqd.] (my italics)