Hurricane Sandy and the Disaster-Preparedness Economy

Jeffrey Phelps for The New York Times

An assembly line at a Generac Power Systems plant. Generac makes residential generators, coveted items in the wake of Hurricane Sandy.

FOLKS here don’t wish disaster on their fellow Americans. They didn’t pray for Hurricane Sandy to come grinding up the East Coast, tearing lives apart and plunging millions into darkness.

But the fact is, disasters are good business in Waukesha. And, lately, there have been a lot of disasters.

This Milwaukee suburb, once known for its curative spring waters and, more recently, for being a Republican stronghold in a state that President Obama won on Election Day, happens to be the home of one of the largest makers of residential generators in the country. So when the lights go out in New York — or on the storm-savaged Jersey Shore or in tornado-hit Missouri or wherever — the orders come pouring in like a tidal surge.

It’s all part of what you might call the Mad Max Economy, a multibillion-dollar-a-year collection of industries that thrive when things get really, really bad. Weather radios, kerosene heaters, D batteries, candles, industrial fans for drying soggy homes — all are scarce and coveted in the gloomy aftermath of Hurricane Sandy and her ilk.

It didn’t start with the last few hurricanes, either. Modern Mad Max capitalism has been around a while, decades even, growing out of something like old-fashioned self-reliance, political beliefs and post-Apocalyptic visions. The cold war may have been the start, when schoolchildren dove under desks and ordinary citizens dug bomb shelters out back. But economic fears, as well as worries about climate change and an unreliable electronic grid have all fed it.

 Driven of late by freakish storms, this industry is growing fast, well beyond the fringe groups that first embraced it. And by some measures, it’s bigger than ever.

Businesses like Generac Power Systems, one of three companies in Wisconsin turning out generators, are just the start.

The market for gasoline cans, for example, was flat for years. No longer. “Demand for gas cans is phenomenal, to the point where we can’t keep up with demand,” says Phil Monckton, vice president for sales and marketing at Scepter, a manufacturer based in Scarborough, Ontario. “There was inventory built up, but it is long gone.”

Even now, nearly two weeks after the superstorm made landfall in New Jersey, batteries are a hot commodity in the New York area. Win Sakdinan, a spokesman for Duracell, says that when the company gave away D batteries in the Rockaways, a particularly hard-hit area, people “held them in their hands like they were gold.”

Sales of Eton emergency radios and flashlights rose 15 percent in the week before Hurricane Sandy — and 220 percent the week of the storm, says Kiersten Moffatt, a company spokeswoman. “It’s important to note that we not only see lifts in the specific regions affected, we see a lift nationwide,” she wrote in an e-mail. “We’ve seen that mindfulness motivates consumers all over the country to be prepared in the case of a similar event.”

Garo Arabian, director of operations at B-Air, a manufacturer based in Azusa, Calif., says he has sold thousands of industrial fans since the storm. “Our marketing and graphic designer is from Syria, and he says: ‘I don’t understand. In Syria, we open the windows.’ ”

But Mr. Arabian says contractors and many insurers know that mold spores won’t grow if carpeting or drywall can be dried out within 72 hours. “The industry has grown,” he says, “because there is more awareness about this kind of thing.”

Retailers that managed to stay open benefited, too. Steve Rinker, who oversees 11 Lowe’s home improvement stores in New York and New Jersey, says his stores were sometimes among the few open in a sea of retail businesses.

Predictably, emergency supplies like flashlights, lanterns, batteries and sump pumps sold out quickly, even when they were replenished. The one sought-after item that surprised him the most? Holiday candles. “If anyone is looking for holiday candles, they are sold out,” he says. “People bought every holiday candle we have during the storm.”

If the hurricane was a windfall for Lowe’s, its customers didn’t seem to mind. Rather, most appeared exceedingly grateful when Mr. Rinker, working at a store in Paterson, N.J., pointed them toward a space heater, or a gasoline can, that could lessen the misery of another day without power.

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Citing Affair, Petraeus Resigns as C.I.A. Director

The sudden development came just days after President Obama won re-election to a second term. Mr. Petraeus, a highly decorated general who had led the wars in Iraq and Afghanistan, had been expected to remain in the president’s administration.

Instead, Mr. Petraeus said in the statement that the president accepted his resignation on Friday after he had informed him of his indiscretion a day earlier.

“After being married for over 37 years, I showed extremely poor judgment by engaging in an extramarital affair,” Mr. Petraeus wrote. “Such behavior is unacceptable, both as a husband and as the leader of an organization such as ours. This afternoon, the president graciously accepted my resignation.”

Mr. Obama released a statement praising Mr. Petraeus for his “extraordinary service” to the country and saying that Michael J. Morell, the deputy director of the C.I.A., would take over once again as acting director. He served in that position briefly after Leon E. Panetta left the agency last year.

“By any measure, through his lifetime of service, David Petraeus has made our country safer and stronger,” the president said. Without directly addressing the affair, Mr. Obama added: “Going forward, my thoughts and prayers are with Dave and Holly Petraeus, who has done so much to help military families through her own work. I wish them the very best at this difficult time.” Ms. Petraeus is the assistant director of the Office of Servicemember Affairs at the Consumer Financial Protection Bureau.

The development came as a shock to the national security establishment. In a statement, James R. Clapper, the director of national intelligence, called the decision “a loss” to the country.

“Dave’s decision to step down represents the loss of one of our nation’s most respected public servants.” Mr. Clapper wrote. “From his long, illustrious Army career to his leadership at the helm of C.I.A., Dave has redefined what it means to serve and sacrifice for one’s country.”

By acknowleding an extramarital affair, Mr. Petraeus, 60, was confronting a sensitive issue for a spy chief. Intelligence agencies are often concerned about the possibility that agents who engage in such behavior could be blackmailed for information.

In his statement, Mr. Petraeus did not provide any details about his behavior, saying that he asked the president to be allowed “for personal reasons” to resign.

Mr. Petraeus praised his colleagues at the C.I.A.’s headquarters in Langley, Va., calling them “truly exceptional in every regard” and thanking them for their service to the country. He made it clear that his departure was not how he had envisioned ending a storied career in the military and in intelligence.

“Teddy Roosevelt once observed that life’s greatest gift is the opportunity to work hard at work worth doing,” he said. “I will always treasure my opportunity to have done that with you, and I will always regret the circumstances that brought that work with you to an end.”

Over the last several years, Mr. Petraeus had become one of the most recognizable military officials, serving as the public face of the war effort in Congress and on television.

Under President George W. Bush, Mr. Petraeus was credited for helping to develop and put in place the “surge” in troops in Iraq that helped wind down the war in that country. Mr. Petraeus was moved to Afghanistan in 2010 after Mr. Obama fired General Stanley H. McChrystal over comments he made to a magazine reporter.

In Afghanistan, Mr. Petraeus led the push for a similar increase in troops ordered by Mr. Obama, but he was unable to replicate the success he had in the Iraq conflict.

Last year, Mr. Obama persuaded Mr. Petraeus to leave the Army after 37 years to lead the C.I.A., succeeding Mr. Panetta, who moved to the Defense Department.

This article has been revised to reflect the following correction:

Correction: November 9, 2012

An earlier version of this article incorrectly stated that David H. Petraeus was expected to remain in President Obama’s cabinet. The C.I.A. director is not a cabinet member in the Obama administration.

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Beljan nearly passes out on his way to the lead

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The New Old Age Blog: More Time to Enroll in Medicare If You Live in Storm Areas

Medicare beneficiaries battered by Hurricane Sandy have one fewer problem to worry about: Federal officials have extended the Dec. 7 deadline to enroll in a private medical or drug plan for next year for those still coping with storm damage.

The Centers for Medicare and Medicaid Services “understands that many Medicare beneficiaries have been affected by this disaster and wants to ensure that all beneficiaries are able to compare their options and make enrollment choices for 2013,” Arrah Tabe-Bedward, acting director for the Medicare Enrollment and Appeals Group, wrote in a Nov. 7 letter to health insurance companies and state health insurance assistance programs.

Beneficiaries hit by the storm can still enroll after the Dec. 7 midnight deadline if they call Medicare’s 24-hour information line: 1-800-MEDICARE (1-800-633-4227). Representatives will be able to review available plans and complete the enrollment process over the phone.

“We are committed to giving people with Medicare the information and the time they need to make important decisions about their coverage,” a Medicare spokeswoman, Isabella Leung, said in an e-mail message. Medicare officials have not set a new deadline but have encouraged beneficiaries to make their decisions soon if possible.

People currently in a plan will be automatically re-enrolled for next year in the same plan.

The extra time also applies to any beneficiaries who normally get help from family members or others to sort through dozens of plans, but who have been unable to do so this year because they live in areas affected by the storm. Neither beneficiaries nor those who provide them assistance will be required to prove that they experienced storm damage.

“This is a really important recognition by CMS to accommodate Medicare enrollees affected by Hurricane Sandy,” said Leslie Fried, director for policy and programs at the National Council on Aging, an advocacy group in Washington.

After the hurricane, the Obama administration declared Connecticut, New Jersey, New York and Rhode Island “major disaster areas,” according to the Federal Emergency Management Agency. In addition, FEMA issued emergency declarations for parts of Delaware, the District of Columbia, Maryland, Massachusetts, New Hampshire, Pennsylvania, Virginia and West Virginia.

More than four million older people in those states are enrolled in drugs-only plans, and more than 2.8 million have Medicare Advantage policies, which includes medical and health coverage.

Susan Jaffe is a writer for Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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Common Sense: At Martha Stewart Living, Martha May Be the Problem

Among America’s corporate leaders, there are surely few whose interests are more closely aligned with their shareholders than the homemaking icon Martha Stewart. She owns 26 million shares and controls nearly 90 percent of the voting rights of Martha Stewart Living Omnimedia. She’s the company’s nonexecutive chairman and serves on the board. Martha Stewart, the company, is inseparable from Martha Stewart, the person.

Her net worth is inextricably tied to the value of the shares. That would seem obvious to everyone except, perhaps, Ms. Stewart herself. She continues to collect lavish multimillion-dollar compensation and perks while her company teeters under the weight of huge losses, its shares trading for a fraction of their former value. The paradox  is that if the stock had risen even $1 a share in recent years, Martha Stewart would be wealthier now than if she had taken only nominal compensation from the company.

“You’d think there’d be very little need for board oversight because of the strong alignment of the company’s interests with her personal wealth,” Paul Hodgson, a compensation expert and senior research associate at GMI Ratings, told me this week. “Everything should be pushing her to make sure the company succeeds. For some reason, that’s not happening.”

Last week, Ms. Stewart’s company reported a $50.7 million quarterly loss, a staggering amount considering it exceeded total revenue, which was just $43.5 million. That was a 17 percent drop from revenue in the same quarter last year. Although the loss included a $44.3 million noncash write-down related to the shrinking value of two of its magazines, the company until recently has been bleeding cash, which dropped from $38.5 million to just $17.4 million in the quarter. The company said it would lay off about 70 employees, 12 percent of its work force, and discontinue its stand-alone print version of the magazine Everyday Food.

None of this bad news has made much of a dent on Ms. Stewart’s own compensation.  Her base annual pay rose from $1.7 million in 2009 to $2 million in 2010 and 2011, and she received a $3 million retention bonus when she signed her new contract in 2009. She gets an additional minimum of $2 million a year under an “intangible assets license agreement,” which gives the company the rights to “Martha Stewart’s lifestyle and the public perception of Martha Stewart’s lifestyle,” including such details as how she arranges her outdoor furniture.

Her corporate perks are well known, and she has long blurred the line between business and personal expenses. She submitted as a business expense the $17,000 cost of her now-infamous holiday trip to the Mexican luxury resort Las Ventanas al Paraiso. She arrived at the resort the day she dumped her shares in the biotechnology company ImClone upon learning, en route, that the company’s chief executive was trying to sell his shares ahead of a negative Food and Drug Administration decision on the company’s principal drug. (She settled charges of insider trading brought by the Securities and Exchange Commission after being convicted of making criminal false statements to cover up the reason for the sale.) Then she had her accountant tell her companion on the trip that she’d have to pay her “fair share” of the costs, according to testimony in her 2004 trial.

The company doesn’t break out Ms. Stewart’s reimbursed expenses, but general and administrative expenses amounted to a lofty $11 million in the last quarter. That number, of course, includes many expenses besides Ms. Stewart’s, like other executives’ salaries.

The company does reveal what it calls other compensation for Ms. Stewart, which in 2011 included a personal trainer and other expenses for personal fitness; a weekend driver; security services; fees for on-air appearances; unspecified personnel costs not otherwise reimbursed by the company; insurance premiums; and an unidentified charitable contribution, which added up to over $1 million.

Ms. Stewart also receives stock options, nearly $1.8 million worth in 2009 through 2011, though she has not received any options so far this year. Still, as Mr. Hodgson put it, “Why is she even getting stock options? Her interests are already thoroughly aligned with the company, given her ownership stake.” Moreover, the intangible license agreement “is very unusual,” Mr. Hodgson said.

All told, Ms. Stewart’s compensation was $9.8 million in 2009, $5.9 million in 2010 and $5.5 million in 2011, or $21.2 million over the last three years, even as the company was in a downward spiral. Just before Ms. Stewart got out of prison in 2005, her shares were trading at over $34 and she was a billionaire. After plunging during the financial crisis, they were above $8 a share in September 2009. They traded this week at about $2.80.

Asked about the issues raised in this column, a spokesman for Martha Stewart Living Omnimedia declined to comment and said Ms. Stewart had no comment.

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A Transfer of Power Begins in China

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Exclusive: Google Ventures beefs up fund size to $300 million a year

SAN FRANCISCO (Reuters) - Google will increase the cash it allocates to its venture-capital arm to up to $300 million a year from $200 million, catapulting Google Ventures into the top echelon of corporate venture-capital funds.

Access to that sizeable checkbook means Google Ventures will be able to invest in more later-stage financing rounds, which tend to be in the tens of millions of dollars or more per investor.

It puts the firm on the same footing as more established corporate venture funds such as Intel's Intel Capital, which typically invests $300-$500 million a year.

"It puts a lot more wood behind the arrow if we need it," said Bill Maris, managing partner of Google Ventures.

Part of the rationale behind the increase is that Google Ventures is a relatively young firm, founded in 2009. Some of the companies it backed two or three years ago are now at later stages, potentially requiring larger cash infusions to grow further.

Google Ventures has taken an eclectic approach, investing in a broad spectrum of companies ranging from medicine to clean power to coupon companies.

Every year, it typically funds 40-50 "seed-stage" deals where it invests $250,000 or less in a company, and perhaps around 15 deals where it invests up to $10 million, Maris said. It aims to complete one or two deals annually in the $20-$50 million range, Maris said.

LACKING SUPERSTARS

Some of its investments include Nest, a smart-thermostat company; Foundation Medicine, which applies genomic analysis to cancer care; Relay Rides, a carsharing service; and smart-grid company Silver Spring Networks. Last year, its portfolio company HomeAway raised $216 million in an initial public offering.

Still, Google Ventures lacks superstar companies such as microblogging service Twitter or online bulletin-board company Pinterest. The firm's recent hiring of high-profile entrepreneur Kevin Rose as a partner could help attract higher-profile deals.

Soon it could have even more cash to play around with. "Larry has repeatedly asked me: 'What do you think you could do with a billion a year?'" said Maris, referring to Google chief executive Larry Page.

(Editing by Muralikumar Anantharaman)

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College hoops season starts with a military flair

The college basketball season gets under way Friday with a game at a Europe military base, two more aboard Navy ships and another featuring a reshaped national champion playing in a brand new building.

No. 14 Michigan State plays Connecticut, in its first game since the retirement of coach Jim Calhoun, at Ramstein Air Base in Kaiserslautern, Germany. It's the first game between Division I teams held in Europe.

Then it's on to the decks for No. 4 Ohio State against Marquette on the USS Yorktown in Charleston, S.C., and Georgetown facing No. 10 Florida on the USS Battan in Jacksonville, Fla.

No. 3 Kentucky, the defending national champion with a heralded freshman class, plays Maryland in the first college doubleheader at the new Barclays Center in Brooklyn, N.Y.

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Doctor and Patient: Comparative Effectiveness Studies Lack Impact

“Comparative effectiveness” studies, which compare one treatment for a particular illness against another to determine which works better, have received a lot of attention and billions of dollars in federal support in the last few years. But when I mentioned comparative effectiveness research recently to a colleague who I know is particularly interested in treatments and the clinical trials behind them, he let out a loud snort and guffaw before I even finished saying the words.

“It’s a great idea, but it’s not real life,” he said, regaining his composure. “Or at least not the real life of a lot of doctors and patients.”

To explain, he described a newly published study on treating children who are thought to have swallowed a small foreign object, like a coin or a toy. He reeled off a long list of laboratory tests, scans, scopes and X-rays that the researchers recommended for such cases, adding, “Those experts assume that everyone lives near big medical centers like theirs, but not all of my patients do. And what are we going to do if the insurance company doesn’t approve of all the tests we order?”

It took only a cursory review of comparative effectiveness research over the last decade for me to realize that my colleague was right. Despite many useful and even potentially cost-saving findings, many of them failed to change doctors’ practice and patient care.

Now a group of researchers has offered a cogent analysis in the journal Health Affairs to explain this failure. And they have done so using methods about as different from comparative effectiveness as research can be.

The researchers talked to more than 50 doctors, patient advocates and other health care experts, each of whom had created, conducted or evaluated comparative effectiveness research or helped introduce the findings into clinical practice. During the interviews, they referred to trials of blood pressure medications, spine surgery, antipsychotic drugs, a heart rhythm device, heart catheterizations and bone marrow transplantation, and then asked why some of these studies seemed to inspire enduring changes while others did not.

A handful of factors came up again and again. Those interviewed frequently referred to the fact that many of these studies did not address the actual needs of practicing clinicians and patients. For instance, one study of medications for treating psychosis focused on the differences in efficacy among the drugs, but mental health care providers really wanted to know about differences in safety.

Sometimes, too, a study’s conclusions required such a significant shift in thinking that doctors and patients had difficulty adjusting to the change, like the recent recommendations against using measures of the prostate-specific antigen, or PSA, as a screening test for cancer. Other times, the findings were so nuanced or ambiguous, with such complicated restrictions on what worked best when, that they simply were not incorporated into professional guidelines or recommendations.

But perhaps the most common reason for these studies’ failures came down to dollars. In the current health care system, clinicians are rewarded for doing and ordering more. Pharmaceutical and medical device firms reap fortunes from physicians’ orders, and a single change could cost them billions. Studies that endorse anything less than another expensive procedure or a newer and more expensive medication or the latest device are often destined for failure or a protracted struggle against drug and device companies that are willing to put up a costly fight.

“The incentives are all out of whack,” said Justin W. Timbie, the lead author and a health policy researcher at the RAND Corporation in Arlington, Va. “The current system favors treatments that are well paid, not necessarily those that are most effective.”

For example, one study found that generic diuretic pills that cost pennies a day worked better for patients with high blood pressure than newer drugs that could be as much as 20 times as expensive. Because hypertension affects tens of millions of Americans, this finding had the potential to save the health care system billions of dollars.

But the finding never really took hold; the percentage of patients taking the cheaper diuretics barely increased. Physicians had a difficult time changing their prescribing habits; limited funding prevented researchers from widely disseminating the results; and pharmaceutical companies waged an aggressive marketing campaign that included paying health care experts to speak about the study in a way that made their expensive drugs seem better.

Based on their findings from these interviews, Dr. Timbie and his fellow investigators offer several suggestions that may improve the impact of these studies. These include realigning financial incentives to support recommended changes in practice; incorporating a broad range of perspectives, like those of practicing doctors and patients, in the design, goals and interpretation of such studies; and, above all, proceeding with a clear strategy for all future comparative effectiveness research.

Despite the challenges, the researchers remain optimistic about the future. And for good reason. Their study was initiated by policy makers and financed by the federal office responsible for health care policy coordination and planning. And representatives from the new national organization, the Patient-Centered Outcomes Research Institute, whose mission is to develop and oversee such studies, have reviewed and discussed the suggestions with Dr. Timbie and the other authors of the study.

“The track record to now has not been great, but for the first time, comparative effectiveness research is a priority for the country,” Dr. Timbie said. “The whole process of generating new evidence has a degree of governance that has never existed before.”

“It’s all about impact now,” he added.

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News Analysis: For Obama, Housing Policy Presents Second-Term Headaches

A second-term president may be just the person to tackle America’s housing problems.

When President Obama first came into office, home prices were crashing, foreclosures were soaring and the previous Bush administration had just initiated the bailout of Fannie Mae and Freddie Mac, the government-backed entities that agree to repay mortgages if the original borrower defaults.

With the market in shambles in 2009, the Obama administration pursued a tentative housing policy, for the most part avoiding big moves that might have further weakened the housing market or banks. Eventually, there were some bolder initiatives, like the national mortgage settlement with big banks as well as the Treasury Department’s aid programs for homeowners.

But as President Obama’s first administration comes to an end, the government is still deeply embedded in the mortgage market. In the third quarter, various government entities backstopped 92 percent of all new residential mortgages, according to Inside Mortgage Finance, a publication that focuses on the home loan industry.

Mr. Obama’s economic team has consistently said it wants the housing market to work without significant government support. But it has taken few actual steps to advance that idea.

“I think Obama is absolutely committed to reducing the government’s role,” said Thomas Lawler, a former chief economist at Fannie Mae and founder of Lawler Economic and Housing Consulting, an industry analysis firm. “But no one’s yet found a format to do that.”

Housing policy is hard to tackle because so many people have benefited from the status quo. The entire real estate system — the banks, the agents, the home buyers — all depend on a market that provides fixed-rate, 30-year mortgages that can be easily refinanced when interest rates drop. That sort of loan is rare outside of the United States. And any effort to overhaul housing and the mortgage market could eventually reduce the amount of such mortgages in the country, angering many and creating a political firestorm.

In other words, the best person to fundamentally change how housing works may be a president who won’t be running for office again.

Most immediately, the housing market has to be strong enough to deal with a government pullback. Some analysts think it’s ready. “I think the housing recovery is far enough along that they can start winding down Fannie and Freddie,” said Phillip L. Swagel at the University of Maryland’s School of Public Policy, who served as assistant secretary for economic policy under Treasury Secretary Henry M. Paulson Jr.

The administration can take smaller steps first. Mr. Lawler, the housing economist, thinks the government could start to reduce the maximum amount that it will guarantee for Fannie and Freddie loans. In some areas, like parts of the Northeast and California, it is as high as $625,000. Before the financial crisis, it was essentially capped at $417,000.

The big question is whether the private sector — banks and investors that buy bonds backed with mortgages — will pick up the slack when the government eases out of the market. If they don’t, the supply of mortgages could fall and house prices could weaken.

Banks say their appetite depends on how new rules for mortgages turn out. In setting such regulations, some tough choices have to be made.

The new rules will effectively map the riskiness of various types of mortgages. In determining that, regulators will look at the features of the loans and the borrowers’ income. Banks say they are unlikely to hold loans deemed risky, and their lobbyists are pressing for legal protection on the safer ones, called qualified mortgages.

The temptation will be to make the definition of what constitutes a qualified mortgage as broad as possible, to ensure that the banks lend to a wide range of borrowers. But regulators concerned with the health of the banks won’t want a system that incentivizes institutions to make potentially risky loans.

One set of qualified mortgage regulations, being written by the Consumer Financial Protection Bureau, could be completed as early as January. Other regulators, like the Federal Reserve, are expected to take longer in finishing their mortgage rules.

Resolving the conflict between mortgage availability and bank strength may depend on the person who replaces Timothy F. Geithner as Treasury secretary. Mr. Geithner is stepping down at the end of Mr. Obama’s first term.

The Obama administration faces other daunting decisions.

One is how to deal with the considerable number of troubled mortgages still in the financial system. Banks might be reluctant to make new loans until they have a better idea of the losses on the old loans. “If you don’t ever deal with these problems, you may never get to where you want to go,” said Mr. Lawler, the housing economist.

To help tackle that issue, the new administration might decide to make its mortgage relief programs more aggressive. It might even aim for more loan modifications, writing down the value of the mortgages to make them easier to pay. The Federal Housing Finance Agency, the regulator that oversees Fannie Mae and Freddie Mac, has effectively blocked such write-downs on the vast amount of loans those entities have guaranteed.

A new Obama administration may move to change the agency’s stance on write-downs, perhaps by replacing its acting director, Edward DeMarco. If that happened, it would be a sign that the White House had a taste for more radical housing actions. The agency declined to comment.

Then there’s what to do with the Federal Housing Administration, another government entity that has backstopped a huge amount of mortgages since the financial crisis. The housing administration was set up to focus on lower-income borrowers, and it backs loans that have very low down payments. Its share of the market has grown since the crisis. The F.H.A. accounted for 13 percent of the market in the third quarter, according to Inside Mortgage Finance.

The new administration has to decide whether it wants the F.H.A. to continue doing as much business. The risk is that a big pullback by the F.H.A. could reduce the availability of mortgages to lower-income borrowers. Banks almost certainly won’t want to write loans with minuscule down payments since they are considered riskier.

Ultimately, housing policy comes down to one question: Which borrowers should get the most subsidies?

Right now, the government largess encompasses a wide swath of borrowers. But most analysts believe government support should be focused on lower-income borrowers.

“We will know that the Obama administration is serious about housing finance reform when it comes up with a proposal for affordable housing,” said Mr. Swagel, the University of Maryland professor.

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