Fighting Foreclosures, Not Entitlements

Some progressives are worried about this signal by PEBO (President-elect Barack Obama) that he will tackle entitlement spending at this time where fiscal spending takes precedence over the deficit, but I'm not. It's based on a direct question he was asked at yesterday's press conference, and his answer was pretty boilerplate. Whenever the chattering class hears the word "entitlements" from a powerful politician, they get a thrill up their leg. Doesn't mean anything's going to happen. And Medicare spending needs to go down as a portion of overall health care spending, so if he's just talking about a comprehensive health care policy, that's not really the same thing.

This part later in the interview is interesting:

In an interview later in the day with CNBC and The New York Times, Mr. Obama suggested that he would hold his economic stimulus proposal to the low end of the amounts that economists think will be necessary because it was likely to grow in size as it moved through Congress. He said that he intended to propose a broad overhaul of financial regulation by April, and that he was working with Congressional leaders on his promised plan to limit foreclosures in the wake of the mortgage crisis.

“We’ve got to prevent the continuing deterioration of the housing market,” he said.

That's good news on both fronts, IMO. The numbers he's throwing around are too small for the problem, so I certainly hope they expand. As for the part about the housing market, Kevin Drum sez that housing is still too overpriced and needs to deteriorate further. But in context, I think Obama is talking about foreclosures. And government ought to be creating incentives to limit those because they not only hurt housing prices but they cause major economic upheaval - a foreclosure costs the greater economy something like $250,000. So encouraging work-outs with homeowners to get them in a position to pay would be a step forward. Like the cram-down legislation working its way through the Congress.

Legislation designed to stem foreclosures by allowing bankruptcy judges to erase some mortgage debt will be introduced by Congressional Democrats on Tuesday, and hopes are high that it will pass after a similar plan failed last year [...]

The legislation would change allow bankruptcy judges to modify home loans in the same way that they currently may modify other unsettled obligations, such as credit card debt.

We simply ought to do this. And the fact that Sheila Bair, who has been pushing the most homeowner-friendly, foreclosre-stemming solutions to the housing crisis, will be staying at the FDIC, is more proof that foreclosures are going to be targeted by the incoming Administration. That's a good thing.