The Administration seems prepared to spend about $50 billion out of TARP funds (with additional funding coming from Fannie and Freddie) on the anti-foreclosure plan. That may be all well and good. I don’t have any specific objection to the proposal — in fact, it seems rather clever, to the extent I understand it. I’ll confess, as someone who made a conscientious decision to rent rather than buy, to some modest and selfish annoyance at rewarding folks who didn’t make as good of a guess about the future of home prices. And I’d probably feel even more annoyed if I had an otherwise-eligible mortgage that didn’t happen to originate with Fannie Mae or Freddie Mac. But there are rather arbitrary sets of winners and losers in most everything the government is doing these days: equity holders in whichever BankCorp just happens to get TARP funds, for instance, or skilled workers in whatever industries happen to have been targeted by the stimulus package. That sort of thing is simply unavoidable when the government has to spend this much money this quickly. The folks targeted by this program, at least, seem liable to be just the sort of folks who have had to do the most belt-tightening, and so the program may have some secondary or tertiary stimulative effects.
What’s interesting, though, is that having $50 million less in the till would seem to make some of the more ‘creative’ approaches toward leveraging TARP funds to recapitalize the banks that much more difficult to accomplish. And it’s certainly not going to be easy to get any further such appropriations through the Congress. Does this then imply that Obama and Geithner are tipping their hand in terms of steering toward some sort of nationalization plan on the banks?