Predictable: Obama’s Housing Loan Effort Makes Thing Worse

Here’s a shocker. A government program (with good intentions, of course) goes awry and actually makes things worse.

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Really, it was completely predictable. The best the the government can do for the housing market right now is to let prices reach their equilibrium (lower) level as quickly as possible. That will bring buyers back into the market, get the construction industry rolling again, and generally help the economy. Of course, the Obama administration is doing the opposite, pursuing policies that distort the market and keep pricies artificially high.

(For those of you out there in your twenties, who don’t own homes, guess who it is who is most hurt by those still-artifically high prices. Yup, it’s you.)

Going forward, I’ll dedicate this blog to similar instances of government fail. Not a single week goes by where I don’t see multiple examples of failed programs, failed ideas, corruption, and incompetence in the government sphere. I’m tired of it. Americans have this idea these days that a benevolent government is going to come around and save their bacon. Nothing could be further from the truth. In fact, history tells us that the bigger and more pervasive that government gets, the more inefficient and bloated it becomes.