Which means anyone who didn't spend too much on their house.
Much as I can see why it was done, this is, as Chris Martneson says, the equivalent of blaming the car for the drunk driving wreck and then offering to buy a new car for every drunk who drives off the road.
More below the fold
Chris Martenson of 'The Crash Course' has an erudite, intelligent, well-thought assessment of where we are and where we could (should) be going in the near future. Key to it is that 'the next 20 years will not be anything like the last 20' and we shouldn't be aiming our economic stimulus at trying to return to the status quo when that state was already broken.
Specifically, he has this to say about the housing bailout
Obama said:
"The plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too. It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone."
He can wrap this with as many words as he wants but the plain facts are that only people in trouble with their mortgages get any handouts here. People who are not delinquent, or who are perhaps renting, only get the opportunity to pay for the mistakes of others.
Politically, this is a great plan. Good sound bites and it looks like action. Also, roughly 9 million votes are secured for the next election. Two thumbs up in this regard.
Economically, it stinks. This is throwing good money after bad, and, worse, by seeking to "shore up sinking house prices," it betrays a complete ignorance of the actual root of the problem. Blaming sinking housing prices for the fix we are in is equivalent to blaming the car for the drunk driving wreck. If Obama were to craft a similar program for drunk drivers, it would include new cars for any that happened to wreck their own. The problem is not that house prices are sinking, it’s that they got too high to sustain. It was a bubble for goodness sake! That’s the very definition of a bubble. Any and all attempts to "shore up" bubble prices is a doomed effort that will assuredly squander both additional capital and valuable time.
Morally, it is a complete disaster. The clear implication here for every sentient person is that it pays to be reckless. Moral hazard is written all over this one. I can easily envision millions of people arriving at the same conclusion: "I need to stop paying my mortgage right away so that I qualify for a handout!" It’s entirely sensible, and I would seriously consider this option if I had a mortgage and little or no equity in the house. As it is, I am a prudent renter who saw the bubble for what it was and will now pay a double price for having been so prescient. First, I will have to endure government-subsidized house prices set above market rates, and I will have to pay for the reckless actions of house owners and lenders who behaved recklessly. This is no way to set an example and is not how I wish my country to be run.
I offer this for comments, not because I necessarily agree with it. I find it a compelling argument, but there are far wiser economic heads on Kos and feedback would be interesting.