Government policies promoted a systematic loosening of underwriting standards in an effort to promote affordable housing, which then contributed mightily to the housing bubble, mortgage meltdown and resulting financial crisis.  

The expansion of agency debt not only imposes risk and realized losses on taxpayers, it also increases the cost of Treasury's direct financing, by creating a huge pool of alternate government-backed securities to compete with Treasury securities, and thus increases the interest cost to taxpayers.

Government housing policies and the toxic mortgages they spawned were the sine qua non of the financial crisis.

On April 13, 2012, the US Department of the Treasury released new cost estimates for the Troubled Asset Relief Program. Looking principally at actual and projected contractual cash flows, the document concludes that: "Overall, the government is now expected to at least break even on its financial stability programs and may realize a positive return." 

In this paper, I endeavor to show that continuing U.S. government involvement in the housing-finance system will inevitably involve serious losses for taxpayers and that the U.S. housing finance system could function well without GSEs or any other form of government financial support simply by ensuring that only good quality mortgages are allowed to enter the securitization system. 

The loan limits should be adjusted to match current market conditions.

The legislativecompromise gives the regulator sufficient authority to control or reduce the GSEs' portfolios and makes the bill satisfactory.

A common regulator for housing GSEs would regulate three of the largest debt issuers in the world.