A new housing finance system

IT HAS been seven years since the U.S. government took over Fannie Mae and Freddie Mac to prevent those two mortgage-finance giants from collapsing and taking the economy down with them. With massive taxpayer help, Fannie and Freddie returned to profitability and more than repaid the $187 billion that the Treasury Department pumped into them. So when Mel Watt, the federal regulator who acts as de facto chief of both entities, lifted the cap on compensation for the chief executives in July, this was no more than an appropriate reward for a job well done, right?

Not exactly. Any time a federal official decrees a $4 million annual compensation target for each of those who run a duopoly of “government-sponsored entities” (GSEs), it’s problematic — both in reality and in perception. The Obama administration was right to protest Mr. Watt’s decision, and now Congress is, fortunately, on its way to overturning it via legislation that has passed the Senate unanimously and cleared the relevant committee in the House by a 57-1 vote. READ MORE