At a time when many distressed homeowners would like to receive a reassuring message from the government, theykeep hearing on the airwaves that the Bush administration is not going to help "speculators."
Treasury Secretary Henry Paulson always punctuates his speeches with a dissertation that the government has noobligation to help people who find it futile to make hefty payments on a mortgage when the value of their househas fallen and continues to slide.
It seems that almost anybody who purchased a home in 2006 and 2007 was just greedy.
Maybe if he were a better orator or had a better speechwriter, the distinction between helping struggling homeownersand shutting off people who rode the housing boom wouldn't come off as so harsh.
| The Treasury secretary is serving up red meat for the Bush crowd, and the code word 'speculator' |
But the Wall Street baron chosen by President Bush to clean up the subprime mess must appease the president's conservativebase, particularly in Congress.
So the Treasury secretary is serving up red meat for the Bush crowd, and the code word "speculator" seemsto fit the menu. Thus "speculator" has become a dirty word.
But it's more than red meat; it is dictating the Bush administration's approach to the housing wreck.
Secretary Paulson told Congress to forget about passing a Democratic bill that would create a special Federal HousingAdministration fund for refinancing 1 million to 2 million homeowners with underwater mortgages.
Under the proposal sponsored by Rep. Barney Frank, D-Mass., and Sen. Christopher Dodd, D-Conn., lenders would haveto write down the mortgage to 85% of the appraised value of the property.
The FHA proposal would give lenders/investors the option of taking a "quick hit or a slow bleed," onepundit said. And it could provide borrowers with an affordable FHA mortgage and a new start.
At first it sounded as if the president opposed this expansion of the FHA program, which, if we remember history,was created during the Great Depression to stabilize the housing market with the introduction of the first 30-yearfixed-rate mortgage.
Later we learn HUD is working on a similar proposal. But the administration does not want Congress involved. Itwants to use FHA's existing authority and bend it to fit today's circumstances.
| HUD's efforts will likely fall far short of the relief the Democratic plan promises. |
But in reviewing drafts of the program, the White House keeps sending it back to HUD and asking how it keeps speculatorsout. So it is taking longer to finalize the program that is supposed to be substituted for the Frank-Dodd proposal.HUD's efforts will likely fall far short of the relief the Democratic plan promises. FHA lenders will probablystruggle to qualify needy borrowers and leave many disappointed.
But more importantly, it shows the Bush administration is trying to address the housing crisis in a targeted waythat does not overreach and shuts the door on speculators.
This tactic also provides political cover in an election year for Republican lawmakers who want to block or voteagainst the Democratic proposal. And it only takes a few Republicans in the Senate to block any legislation andkeep it away from president's desk.
