A Lost Opportunity for Washington?

In the decades preceding the recent economic crisis, the federal government - often at the urging of the White House - stimulated home ownership through steerage of tax breaks, interest rates, or HUD policies.  Now, as the foreclosure numbers continue at unfathomable highs, intervention by Washington, D.C. seems restrained, at best.

Thus leaving it to the states to fashion remedies for the growing problem of "strategic defaults" (i.e., homeowners simply walking away from mortgages).  Apart from the legal and ethical ramifications of that move, can such a mass response be good for consumers in general?  Banks are pretty good at spreading the cost of credit card fraud to the model consumers; I find it hard to believe that we won't all similarly end up paying for a practice that leaves lending institutions in the undesirable role of negative equity homeowner.  I find it harder to believe that an administration seemingly dedicated to touting the curative powers of big government has yet to propose a meaningful solution to a national foreclosure problem that promises to get worse.

For a discussion of California's debate over legislation aimed at capping foreclosure amounts, see "Battles in California Over Mortgages" in today's New York Times at http://www.nytimes.com/2010/06/22/business/22default.html?ref=business.

--JSC, 6/21/10