This morning’s front page New York Times article follows two days of Wall Street buzz that another Administration housing refinance program will be forthcoming soon. The road is littered with past failures as cited in this CRS testimony last spring. Nonetheless, President Obama’s intense fundraising, opening of the Strategic Petroleum Reserve, and upcoming Labor Day speech on jobs all share single focus: get reelected by lowering the unemployment rate and reviving the housing market within the next year. I thought all of those afternoon meetings President Obama had with Treasury Secretary Geithner a few weeks ago were about the S&P downgrade and the Euro, but they may have been to explore new domestic policy initiatives. To the extent that homeowner fears are behind the weak housing market, another trumpet blast from President Obama might help.
There are plenty of constraints. Number one, the House won’t pass anything to help President Obama get reelected unless forced to by public pressure. Mr. Obama’s call for extending the 2% payroll tax cut and extended unemployment insurance beyond the end of this year have fallen on deaf ears of House Republican leaders. Number two, new programs can’t cost much because there’s little money left on the table from past efforts. TARP expired last October. Number three, mortgage investors have refused repeatedly to take a haircut in the past, despite federal offers to ease their pain. Number four, housing finance is so fragmented by state that it’s very difficult to implement a national program without a lot of custom tailoring. Finally, litigation will gum up the works long past the next election on November 6, 2012.
The real wildcard in my opinion is the Fed. At 10 AM tomorrow, Fed Chair Ben Bernanke will address the Kansas City Fed conference in Jackson Hole, WY. He’s the one actor who could throw major resources at the housing slump.