The lead article in AIER’s September 1 Research Reports traces the evolution and implications of the biggest piece of housing policy legislation since 1934.

The Housing and Economic Recovery Act of 2008 addresses the needs of an array of constituencies, some of them obvious, some not. Among them: non-prime borrowers who may face foreclosure, senior homeowners interested in reverse mortgages, first-time homebuyers, states, localities, and the taxpaying public that will be asked to foot the bill.

But above all, the new law makes sure that quasi-governmental mortgage giants Fannie Mae and Freddie Mac survive more or less as-is.

Indeed, writes AIER researcher R. D. Norton, it was the twin giants’ rapidly deteriorating finances that propelled the bill through Congress to President Bush’s July 30 signature—despite his earlier pledge to veto it. One compelling reason behind the president’s change of heart is the $1.5 trillion in bonds that Fannie and Freddie sold to foreign governments.

In his 2400-word article, Norton describes what he calls America’s “Argentina moment." He builds a compelling case that the main goal of bailing out Freddie and Fannie may have more to do with international capital markets than with domestic housing.