05/16/2014 02:33 pm ET Updated Jul 16, 2014

Giving the Hen House to the Fox

Just because your credit score is not perfect does not mean you won't or can't pay your bills on time. Millions of Americans, with just "good" credit scores, are worthy of loans, especially when they want to buy a home.

Owning a home is the way most Americans have built wealth. Turning them into renters only widens the gap between the rich and everybody else.

Tough lending standards put in place after the housing bust contributed to the gap. But, federal housing regulator Mel Watt announced this week that standards are to be changed. Hopefully this will convince banks to make more mortgages.

The loosening of the standards means banks have no more excuses for denying mortgages to Americans who have less-than-perfect credit. Down-payment requirements also will be reduced.

Watt, as the overseer of Fannie Mae and Freddie Mac, is addressing concerns raised by banks about the bad loans they have had to buy back from the two government-sponsored agencies. Banks have cited the buy-back program as the reason why they will not make a loan to anyone with a credit score under 740.

Fannie and Freddie buy mortgages from banks so that the banks can make even more loans -- at least that's the way it worked before banks and Wall Street conspired to generate huge fees for themselves while pushing Americans into loans they could not afford.

Some in Congress and in the administration want to do away with Fannie and Freddie and hand over their portfolio to the private banking industry, but without the previous requirements that banks do a certain amount of business with low-to-moderate income individuals.

This makes no sense to me.

Why reward an industry with a hugely profitable piece of business when that industry caused the largest financial crisis since the Great Depression?

Why not simply require that federal regulators do their jobs by keeping watch over Fannie, Freddie and the rest of the housing industry?

We aren't just letting the fox guard the hen house. We are giving the fox the hen house, and we are asking for nothing in return.