David H. Stevens of the U.S. Department and Urban Development wrote a letter to the WSJ (“FHA is Fulfilling Its Mission Well“) in which he responded to an August 11 editorial (“The Next Fannie Mae : Ginnie Mae and FHA are becoming $1 trillion subprime guarantors.“).

Stevens says he doesn’t like the comparison of the FHA to subprime lenders. He says the FHA operates entirely from its self-generated income.

Great! If everything he says is true, it means we don’t need an FHA, or at least not one backed by the U.S. Government. The organization can go private and compete on equal terms with other lenders. Wouldn’t that be a great way for Obama to get back at his critics who say the relationship between private industry and the government is a one-way street? He could give an example of an institution that’s back on its feet. Mission accomplished! Then people might trust him more the next time he wants to intrude into ownership of private business.

Alas, I went back and read not only Mr. Stevens letter but the original editorial. The editorial talked about how the HUD Inspector General has raised the alarm on growing default rates, and told of a likely need for for more tax dollars.

Who do we think is going to be taken to the woodshed by the Obama White House: Mr. Stevens or that HUD Inspector General?