Filed under: Housing, Recession

The subject just won't go away. Some lawmakers want TARP money to go toward stopping foreclosures. That is not exactly what the fund was supposed to be used for, but, by the same token, it was not meant to buy equity in banks. Paulson decided to do so anyway, which opened the door for using the TARP capital for whatever the Congress or Treasury want it to be used for.

According to The Wall Street Journal, "The federal government should devote at least $50 billion of the remaining financial-rescue funds toward a plan to prevent foreclosures, said House Financial Services Committee Chairman Barney Frank Friday."

That may be a noble idea, but it is not practical. The trouble with using government money to directly aid homeowners is that it would be remarkably complex and inefficient. Which homeowners qualify? How do they get their money, or a cut in their obligations? Is the program supervised by some federal agency or by banks? Who is considered needy and who is not?

Bailing out homeowners one at a time a a proposal that makes good headlines. It may help some members of Congress look like champions of the common man. But, the only realistic way to get relief for people having trouble paying their mortgages is to cut taxes or increase national employment. A person without a job, or a person worried about his job is not likely to view paying his mortgage any differently just because the government cuts his monthly payment from $800 to $600. It is still money he does not have.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Barney Frank wants TARP money for foreclosures originally appeared on BloggingStocks on Sat, 10 Jan 2009 13:40:00 EST. Please see our terms for use of feeds.