Any doctor will tell you that throwing medicine at a problem invites serious mistakes. Congress must have missed that lecture, given that it's tackling the housing crisis with a flurry of mostly ill-advised fixes.
This week, the Senate moved closer to completing a housing bill that would provide billions in tax relief for banks, homebuilders and other businesses. In contrast, a House committee began shaping a tax package to help the Average Joe on Main Street.
Mostly missing in these discussions is the need for a better mechanism to help homeowners work out new mortgage arrangements to avoid losing their homes. The Bush administration's Hope Now program promised this but is turning out to be slower and less effective than expected.
Given that orderly refinancing is the core of a solution, Congress needs to avoid proposals that would further distort the housing market or work at cross purposes.
Here's an example: House Democrats want to offset the revenue lost under their bill with taxes on capital gains. This is hardly a housing solution or economic stimulus if what's given to the left hand is taken back from the right hand.
The Senate bill also has significant flaws, namely tax breaks for homebuilders and tax credits to buyers of foreclosed homes. At a time when the housing market is glutted, these measures would encourage speculators and make a bad situation worse. Moreover, the bulk of the Senate's measure either would benefit companies that have nothing to do with housing or provide little help to homeowners.
Congress has to focus on helping homeowners refinance mortgages that are delinquent, in foreclosure or nearing default. Allowing the Federal Housing Administration to expand its authority to help refinance troubled loans is a step in the right direction. And it's something on which Congress and President Bush can find a compromise. Expanding unemployment benefits and providing emergency rental assistance to displaced homeowners also are options.
Not all homeowners can or even should be helped. Congress must remember the medical edict and do no harm.
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