If insanity is properly defined as doing the same thing over and over again while expecting different results, then the Obama administration would seem to be fairly described as a group of lunatics.
Housing Secretary, Ray Donovan, said this morning that they have more tricks up their sleeves to turn around the housing market. According to CNBC, he in no particular order offered these new initiatives:
- A refinancing plan for underwater homeowners.
- An “emergency homeowners loan program” to help the unemployed keep their homes.
- Waffling on the possibility of reviving the housing tax credit.
I suppose that it can’t hurt much if the government decides to refinance underwater loans that it owns or guarantees. Sort of in for a penny, in for a pound. On the other hand, if they choose to refinance all comers then that amounts to a bailout for private holders of mortgages. I’m sure JP Morgan, BofA and others would be only too happy to have FHA take a bunch of likely defaults off their hands. This may be just another backdoor subsidy for the banks.
The unemployed homeowner loan program has been kicking around for awhile and has been pretty much punched full of holes. Trying to cure a problem of too much leverage with more debt is the type of idea that only government could come up with. Further restricting labor mobility by tying a bigger anchor to unemployed homeowners makes no sense at all.
As for the tax credit, well let’s just say that the fact it’s still even on the radar is ample evidence of the lobbying clout of the real estate industry. One wonders if they truly believe that there is an infinite amount of future demand for housing that can be pulled into the present.
I suppose that Donovan couldn’t go on television and say that we’ve given it our best shot and the housing market we have now is as good as it’s going to get for awhile. At least, let’s hope that’s the case and not that the administration really believes if they keep trying they’ll stumble onto the miracle cure.