The Moral Hazard of Not Helping Homeowners

The New York Times comes down hard today on the Bush Administration and the Treasury Department for failing to move forward with a plan to help modify the mortgages of homeowners in trouble. As the Times points out in its editorial, yes, there will be some controversy over any attempt to help troubled borrowers, because some who aren’t worthy may get help, or those who make their payments on time will think it unfair. But with millions of mortgages looming, it’s in everyone’s best interest to stop the housing slide – and to do it before it takes down the entire economy.

From the Times:

Treasury Secretary Henry Paulson does not seem like the sort of man who suffers fools gladly. Yet, he apparently is tolerant of, or powerless against, a White House that remains opposed to direct government action to prevent foreclosures — a program that is essential to keep millions of Americans in their homes and head off an even deeper financial catastrophe.

Nearly three weeks ago, Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation, told Congress that the agency was working closely with Mr. Paulson’s department to develop a robust anti-foreclosure plan. Since then, the Treasury Department has balked and equivocated while the White House has argued that it is already doing plenty to help homeowners.