I make no secret that I stand quite a bit to the right of the NY Times editorial board on most fiscal matters. In today’s editorialon the presidential candidates, the Times portrays McCain as a Whig and Obama as a Caped Avenger. Both portrayals are problematic. Most government solutions are window dressing at best and have terrible unintended consequences; the last thing we need is feel good political maneuvering for hard core problems. We already know the solution, and the president who will make the most difference is actually Roosevelt. The FHA made a difference in the 30’s. It will help just as much now.
The government has already expanded the FHA to both cover for the gaps in the credit crunch and ensure that future systemic problems will be avoided. Just yesterday they waived the 90 day waiting period on rehabbed resales (“flips”). I propose that the bulk of government aid be to lenders who responsibly allow for defaulting borrowers to exit via a short sale. That would allow a more organic return to a normal market and minimize the unintended consequences of many government panaceas.
The editors of the Times either don’t know or don’t care that less is more. The damage has been done, and while we need more from Uncle Sam, the focus should be more on the preventative than the curative.