$25 billion in National Mortgage Settlement and other policy efforts have worked to prevent the real estate market from clearing.  At the same time, these policies have harmed those who have done the right thing.

The fat years of the housing bubble lasted from 1999 to 2006 - seven years. The bubble was deflating by the beginning of 2007 and collapsed into the panics of 2007-09. Since then we have been struggling in its deflated wake. If we get the Biblical sum of seven lean years, the housing and related debt markets will bottom in 2013 - not a bad forecast. 

The Senate approved legislation to restore modest reductions to the loan limits applicable to Fannie Mae, Freddie Mac, and FHA. Except for the housing lobby, there is widespread agreement that reducing these limits is a key first step towards ending the government's chokehold on the now nationalized housing finance market.

In 2011, the Government Mortgage Complex accounted for 88 percent of all first-mortgage originations in the United States, with the government also controlling an estimated 90 percent of the student loan market. The government’s growing dominance in the home mortgage and student loan categories is cause for concern, posing a threat to private investors, borrowers, and taxpayers.

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.  

Most people know virtually no financial history, so when we have a financial crisis, it seems like it has never happened before. But it has, again and again. As Paul Volcker, former chairman of the Federal Reserve, remarked: "About every ten years, we have the biggest crisis in 50 years." 

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The Federal Housing Administration is supposed to support low-income housing without costing taxpayers a dime. Today, the FHA is subsidizing middle and upper-middle income homes - and setting itself up for a huge taxpayer bailout.