Pres. Obama’s Housing Plan Won’t Solve the Problem
Today, President Obama asked Congress to approve a $5 billion to $10 billion proposal to help homeowners refinance. The proposal is expected to help roughly 3.5 million homeowners who have been current on their mortgage payments in the past 6 months and have missed no more than one payment in the 6 months prior to that.
Sound familiar? That’s because we’ve heard this before, according to House Speaker John Boehner (R-OH):
“We’ve done this at least four times, where there’s some new government program to help homeowners who have trouble with their mortgages. None of these programs have worked. I don’t know why anyone would think this next idea is going to work.”
There are already programs to “help” homeowners who are current on their payments. Speaker Boehner went on to say that this tinkering has delayed the market from clearing. This constant government intervention continues to distort where housing prices really are and until the market truly bottoms out (which people have been claiming it has for the past few years) the market won’t be able to right itself.
The problem here is that the government (thanks to Senators like Chris Dodd of Connecticut and Congressmen like Barney Frank of Massachusetts) forced banks to give out loans to people who couldn’t afford them. Quasi-government agencies implicitly backed those bad loans and inflated the market, creating a bubble, which popped.
The idea that more government intervention will solve the problem it created is laughable. At this point it seems the best action is for the government to stop trying to artificially prop up the market and get out of the way.