Obama to bypass Congress on housing

Barack Obama wants to pose as a man of action on the economy, the New York Times reports today, and so he will announce a series of executive actions on housing and education.  Obama hopes that these actions will contrast himself with Congress, where even Democrats have balked at passing his American Jobs Act either in whole or piecemeal:

With his jobs plan stymied in Congress by Republican opposition, President Obama on Monday will begin a series of executive-branch actions to confront housing, education and other economic problems over the coming months, heralded by a new mantra: “We can’t wait” for lawmakers to act.

According to an administration official, Mr. Obama will kick off his new offensive in Las Vegas, ground zero of the housing bust, by promoting new rules for federally guaranteed mortgages so that more homeowners, those with little or no equity in their homes, can refinance and avert foreclosure.

And Wednesday in Denver, the official said, Mr. Obama will announce policy changes to ease college graduates’ repayment of federal loans, seeking to alleviate the financial concerns of students considering college at a time when states are raising tuition.

Will restructuring student-loan debt really help the economy?  It sounds more like a ploy to pander to the Occupy Movement, which in its occasionally coherent moments demands free higher education and complete forgiveness of tuition debt.  States are raising tuitions, though, in response to demand created by cheap student loans, which Obama proposes to make even cheaper.

The efforts on housing and mortgage restructuring come curiously at the same moment when the Washington Post issued a blistering report on Obama’s failures in this area:

Obama has spent just $2.4 billion of the $50 billion he promised. The initiatives he announced have helped 1.7 million people. Housing prices remain near a crisis low. Millions of people are deeply indebted, owing more than their properties are worth, and many have lost their homes to foreclosure or are likely to do so. Economists increasingly say that, as a result, Americans are too scared to spend money, depriving the economy of its traditional engine of growth.

The Obama effort fell short in part because the president and his senior advisers, after a series of internal debates, decided against more dramatic actions to help homeowners, worried that they would pose risks for taxpayers and the economy, according to numerous current and former officials. They consistently unveiled programs that underperformed, did little to reduce mortgage debts owed by ordinary Americans and rejected a get-tough approach with banks. …

Obama promised to spend $50 billion to $100 billion of the $350 billion remaining in the Troubled Assets Relief Program, or TARP — the giant pool of money that had been used to bail out banks in the months before he came to office — to provide aid to homeowners: Main Street, not Wall Street.

Obama’s top advisers faced difficult questions about how to spend the money. None favored using taxpayer money simply to wipe out all the bad debt. That would have required one of two things: handing out up to $700 billion to more than 10 million Americans so they could pay off part of their loans, or asking Congress to force banks, which had just narrowly escaped collapse, to tell borrowers they did not have to pay back their whole debt, which would lead to more financial losses for the firms.

Instead, Obama went with HAMP and HARP, which has nibbled at the edges of the problem for the last three years — and haven’t even spent 10% of the money Congress authorized, let alone the full $50 billion.  Now Obama wants to claim that he will use his executive authority to act where Congress won’t, but clearly Congress hasn’t been the problem here.  They authorized tens of billions of dollars that Obama requested in early 2009, but the administration has incompetently bungled those programs with little to show for it.

Will Obama’s new proposals do the trick?  James Pethokoukis says it’s basically more of the same:

If that analysis is accurate, this housing relief effort by the Obama White House won’t accomplish more than previous attempts. Back in early 2009, Obama promised to help “as many as 3 to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure.” But just 816,000 homeowners have received permanent mortgage modification through federal housing programs.

That’s small potatoes. Tiny potatoes, really. According to CoreLogic, some 11 million, or nearly a quarter, of all residential properties are in negative equity. Another 2.4 million have less than five percent equity. More than 4 million mortgages are at least 90 days delinquent or in some stage of foreclosure, with another 3.4 million mortgages likely on their way during the next year, according to some analysts.

Sure, any little bits helps. But it’s hard not to conclude that this meager plan is little more than an effort in political theater, a campaign-season sop to worried middle-class voters and the Occupy Wall Street movement. Given the small scope of the housing plan, it’s likely that the student loan piece will be little more than a recycling a previous proposals. All in all, just enough to garner positive headlines but not so much as to scare taxpayers or bankers. Obama wants to be seen as compassionate yet fiscally responsible. A little bit OWS, a little bit Tea Party.

The real problem in the housing crisis isn’t mortgages, it’s unemployment.  Even an underwater mortgage is still manageable as long as the debtor maintains an income level that affords the payments.  Foreclosures don’t happen because of devaluation of property — they occur because payments don’t get made.  Further, if homeowners have steady incomes, banks don’t need government interventions for refinancing and restructuring mortgages; they have plenty of motivation to perform those on their own.

Unfortunately, the same administration that couldn’t get out of its own way to spend the $50 billion they requested for the very purpose of alleviating underwater mortgages with federal guarantees also can’t get out of the way of economic expansion.  The Obama administration’s rapid expansion of ambiguous and burdensome regulations has killed job creation in the US, which means that even a new HAMP/HARP program still won’t address the core problem of the economy and the housing markets.  This is just political theater designed to distract from the cause by highlighting the chronic symptoms, even while the White House has proven inept at addressing even those symptoms.

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