With the mortgage crisis forcing people from their homes and undermining the economy, it may have seemed encouraging last week when the White House unveiled its policy proposal. Paul Krugman explains today that the administration is largely getting the crisis backwards.
[Treasury Secretary Henry] Paulson’s actions reflect the priorities of the administration he serves. And that, ultimately, is what’s wrong with the mortgage relief plan he unveiled last week.
The plan is, as a Times editorial put it yesterday, “too little, too late and too voluntary.” But from the administration’s point of view these failings aren’t bugs, they’re features.
In fact, there’s a growing consensus among financial observers that the Paulson plan isn’t mainly intended to achieve real results. The point is, instead, to create the appearance of action, thereby undercutting political support for actual attempts to help families in trouble.
In other words, it sounds an awful lot like every other proposal out of this White House.
As Elizabeth Warren, the Harvard bankruptcy expert, puts it, “The administration’s subprime mortgage plan is the bank lobby’s dream.” Krugman added, "Given the Bush record, that should come as no surprise."