February 10, 2012


In Lyndon Johnson and the American Dream, Doris Kearns Goodwin (just Doris Kearns in NR’s copy of the book — we’re old-school) has one interesting observation about LBJ: He never got out of the legislative mind-set, and his measure of success when crafting his hallmark programs, from Medicare to the Civil Rights Act of 1964, was simply getting the bill passed. Never mind the contents of the program: Just get something signed into law. Tragically for LBJ, he didn’t have a Nancy Pelosi around to tell us that we had to pass Medicare so we could find out what’s in it.

I get the same feeling for President Obama’s new mortgage settlement: Never mind what it does, or whether it does any good, just get everybody’s signature on the deal.

Here’s what it does not do: It isn’t going to prevent a lot of foreclosures (and may in fact cause some), it isn’t going to assuage the terror in the mortgage markets, and it probably isn’t going to clean up the system that caused some number of homeowners to be foreclosed on without proper documentation.

Like the fiasco that was HAMP, this settlement will encourage homeowners to become delinquent on their loans: There’s $10 billion set aside for principal writedowns for delinquent homeowners, but paid-up borrowers only get $3 billion to encourage the refinancing of underwater mortgages.

As always a disincentive to productivity and thrift, an incentive to mooching and looting.

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