Bernanke Tries to Fix Housing

Ben Bernanke, the head of the Federal Reserve, sent the chiefs of the House Committee on Financial Service a 24-page note about the problems of the housing market and the need for them to be solved if the economy is to recover. He might as well have spent his time on something else. Nothing in his document broke any new ground. The Fed has no better solutions to the collapse in home prices and the fallout from it than any other person or organization.

Most of what Bernanke had to report is a recitation of the current trouble in the housing system. And, most of it is stock stuff: Mortgage problems are related to joblessness. People who are creditworthy often cannot get home loans. Home prices are down 33% from their 2006 peak. The federal government’s attempts to resolve the troubles have been ineffective.

Bernanke’s conclusion is that, “Looking forward, continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery.” He suggests that Fannie Mae and Freddie Mac could do more to support housing, if only taxpayers were willing to shoulder the burden of more short-term losses at the agencies.

Part of the Bernanke solution is that more homes in foreclose should be converted to rental properties. And unnecessary foreclosures should be, based on new policies that might be adopted by Congress, avoided. But banks will resist a set of new foreclosure standards because they likely would cause losses. The conversion of foreclosed homes to rental would take years and incalculable sums of money.

Most of what Bernanke says about the housing problem, its effects and possible solutions is reasonable. What is not reasonable is that taxpayers might believe that if they risk more of their tax dollars now, they will benefit from a recovery of the housing market in several years. This potential process also assumes that Congress has the will to put a larger portion of the federal budget toward a set of solutions to mortgage troubles, at a time when the debate about national budget austerity consumes much of what is discussed in the House and Senate. Gridlock may contribute to the lack of a housing solution. A larger contributor is that Americans are concerned with jobs, taxes and entitlement programs much more critical to them than anything else. The agenda plate is full.

Bernanke and other people of stature can send as may letters and lists of solutions to Congress as they can write. None will make any difference. Housing is a major problem for the U.S., but it is one that will be left mostly to troubled homeowners and those with foreclosure problems. No one else cares enough.

Douglas A. McIntyre