"Commentary"-Rebuilding The Economy One Mortgage At A Time
Monday, January 12, 2009SUZANNE PRATT: Tonight's commentator says mortgage help remains the key to shoring up the financial crisis. He's Douglas Holtz-Eakin, president of DHE Consulting and former director of the Congressional Budget Office.
DOUGLAS HOLTZ-EAKIN, PRESIDENT, DHE CONSULTING: Back when Wall Street started melting down and the economy started heading south, there was an easy-to-see source of our problems: bad mortgages and a housing collapse. Now the recession is a year old. We've seen the Federal Reserve run through its playbook. We've tried rebate checks, bailout bills and now Washington is talking stimulus, but we've never solved the basic problem. One in six - - 10 million families -- are stuck with mortgage debt larger than the value of their house. Millions more can't make their payments. The result is a vicious cycle of defaults, foreclosures, lower housing values, cash- strapped families and ruined neighborhoods. We've tried some band-aids called Hope Now and Hope for Homeowners and the situation is just as hopeless as before. It's time to get serious. What's the solution? Money. In particular, we should take the remaining $350 billion from the financial bailout bill and use it to help homeowners refinance their homes so the mortgages match the new housing values and the payments match their budgets. It's a two-for: stimulus and financial rescue. With a manageable mortgage, families can spend on their other needs. That's great stimulus. With the threat of default eliminated, complex securities can be valued. Banks can tidy up their balance sheets and get back to lending. Putting the bailout money on the table will give everyone an incentive to jumpstart fixing these mortgages. Is it perfect? No, it's really expensive. Some of the people who will get help were foolhardy, not victims. Some bad lenders will not bear the full brunt of their actions. These problems also occur with unemployment benefits, food stamps and welfare, but we keep those programs because of their contribution to the greater good. In this case the greater good is fixing the housing market, saving American families and propping up the economy. I'm Douglas Holtz- Eakin.
