Some early, and mostly positive, reactions to President Obama’s new Housing Affordability and Stability plan: The New York Times dubbed it “more ambitious than many housing analysts had expected,” and “marks a sharp break from the housing policies of Mr. Obama’s predecessor, George W. Bush.” Felix Salmon, the influential financial blogger at Portfolio.com, described it as “quite elegant,” and added that the “plan aims straight at the heartland, where it really matters.”
Stock investors couldn’t seem to make up their mind, although if their extreme displeasure at Tim Geithner’s speech last week is any guide, their indecision today is a veritable hallelujah. CNN talked to some stock analysts and found muted support — “The devil is in the details, but in broad strokes this sounds much better than the financial-stability plan and the fiscal-stimulus plan,” said Doug Roberts, chief investment strategist for ChannelCapitalResearch.com.
At Tapped, The American Prospect’s group blog, Tim Fernholz interviewed Barbara Sard, the director of housing policy at the Center for Budget and Policy Priorities, who said “the plan looks very good in a number of respects,” and calls the various government incentives aimed at encouraging servicers to modify loan terms “smart” and “clever.”
Barry Ritholtz at The Big Picture called it “a little better than I expected, but it still dances around an issue that is sacrilegious to many economists: Home prices are still way too high for any stabilization and/or housing bottom to form.”
At Calculated Risk, the chief objection is that, while the plan explicitly aims not to bail out speculators or housing “flippers,” it will still end up helping people who knowingly took on mortgages that under normal circumstances they could never afford. This is a valid criticism: Some people who don’t deserve government will get it.
My own feeling is that it would be impossible to design a plan strong enough to provide any real stabilization to the housing sector that did not help out people who took advantage of exotic mortgage products and subprime lending standards to get into their McMansions. But the potential benefits for the economy as a whole from a successfully executed plan outweigh that drawback, in my view. The more critical dilemma is whether the plan is powerful enough to achieve its stated goals. The Obama administration plans to use $75 billion of TARP funds to pay for the incentives that will grease the desired loan modifications, and is extending another $200 billion to Fannie Mae and Freddie Mac via funding previously authorized by Congress. It seems clear that the Obama team is looking for ways to get the most bang for the buck, and $275 billion is nothing to sneeze at. But whether or not there is a thrifty way out of our current morass is still quite open to question.