24/7 Wall St.

The theory about the economy, which probably has the benefit of being true, is that while the housing market is broken, the rest of the country’s financial problems will remain largely unsolved. Too many banks hold mortgages or mortgage-back paper. Too many consumers rely on the value of their homes for a sense of economic safety and collateral for their mortgages.

The government has not fixed housing. Neither has the banking private sector. Housing is still the big unrepaired problem at the center of America’s diving economic fortunes.

According to Reuters, "More than half of troubled borrowers face losing their homes even six months after lenders have eased their monthly payments." Giving people better terms on their mortgages is not making the grade.

The trouble is that getting people who believe that they will lose their jobs or that their incomes will fall to pay even modest mortgage obligations is next to improbable. There is too great a temptation for citizens to walk away from homes which they believe have deteriorating value and either rent or move in with the relatives.

Nothing short of heroic efforts will take the value of housing back up again soon. The federal government could support the home market by buying up residences, but what will become of them? Perhaps they could become shelter for the unemployed. That would move the United States toward a remarkable socialism and make the Treasury the largest landowner in America.

Short of buying its way out of the problem, the new administration can only hope that jobs programs will make people feel less vulnerable to being thrown out of work. At the pace that workers are being laid off, that day may be well into a distant future.

Douglas A. McIntyre