It was predictable that President Barack Obama would pander again to entitlement sentiments. This time involves the misguided belief that everyone is entitled to homeownership, even at the government’s — the taxpayers’ — expense.
But the president’s audacity is a bit much to take, even for an election year.
Obama wants to effectively bail out borrowers who owe more than their homes are worth by having taxpayers assume the risk of borrowers defaulting. This is the same president who this week promised to end bailouts, even as he touted the supposed success of his auto industry bailouts.
Obama has become the master of double talk. He’s against bailouts except for when he’s for them. His latest housing “assistance” plan makes him for them again.
The president also is apparently oblivious to the primary cause of the housing crisis that has dragged down the economy since 2007, resulting in many inflated mortgages that outpace the diminished value of the homes they secure. The impetus of the housing crisis was artificially high home values driven by easy money, bad-credit loans initiated at the government’s insistence that everyone should own a home, if they could afford it or not.
Now Obama proposes what the Associated Press describes as “a vast expansion of government assistance to homeowners” by guaranteeing lower-interest refinanced loans. Much more of this kind of help and it may be decades before the housing market rights itself.
Compounding his errors, Obama wants to fund up to $10 billion in Federal Housing Administration loan guarantees by imposing a fee on the nation’s largest banks.
It is probably no coincidence the president’s latest ill-conceived pandering may be well-received in swing states like Virginia, Florida and Nevada, which were hit hard by mortgage foreclosures. And it probably is irrelevant that he has little chance of getting his plan through Congress, which rejected a similar proposal even when Democrats controlled both houses.
What probably matters is the president hopes to be seen as champion of the unfortunate. Indeed, Obama singled out his likely opponent in the fall, Republican front-runner Mitt Romney, by ridiculing Romney’s contention that the foreclosure process should be allowed “to run its course and hit the bottom.”
Rather, the president moralized, “It is wrong for anyone to suggest that the only option for struggling responsible homeowners is to sit and wait for the housing market to hit bottom.”
That platitude may resonate as compassionate. But in truth, Obama’s plan would prolong a necessary market correction, delaying further the market hitting bottom. In the interim it would cost taxpayers billions, as well as penalize large banks, in turn, reducing new lending. Potential new borrowers would be punished by seeing credit availability fall and its costs rise. This would be only the beginning of ill effects as economic repercussions spread.
But, in an election year, real-life consequences have little to do with compassionate pandering to the entitlement-minded.