Dean Baker: Obama helping banks, not homeowners

Economist Dean Baker says the latest Obama plan to "help" homeowners will only help banks. I agree.

Alan Greenspan, Ben Bernanke, and the rest of the crew running economic policy somehow could not see the housing bubble as it grew to more than $8tn. It really should have been hard to miss. ...

As a result of this astounding incompetence, we are now living through the worst downturn since the Great Depression. Because Greenspan and Bernanke and the rest messed up, tens of millions of workers are unemployed. ...

Remarkably, the folks in charge seem to have learned zip. They still have no clue about the housing bubble. How else can anyone explain the Obama administration's latest proposal for helping out underwater homeowners?

If the point is to help homeowners then there are two incredibly simple questions that must be asked:

1. Are homeowners paying less under the plan than they would to rent the same place?

2. Are homeowners going to end up with equity in their home?

These are the key questions, because if we can't answer yes to at least one of them, then we are not helping homeowners. If we can't answer yes to at least one of these questions, then taxpayer dollars being put into the programme are helping banks, not homeowners.

Unfortunately, it seems no one in the Obama administration has yet been told about the housing bubble. There is no evidence that they ever considered these questions in designing the latest policy to "help" homeowners.

Dean Baker goes on echo my rants about the financially-unstable FHA.