Gordo for Governor? One Democrat Is Worried

There has been much impassioned public agonizing over the crisis in
the housing market, much of it strongly expressed but not deeply
thought. It is clear that something must be done to reverse the
declines in housing. No domestic sector is as crucial to US economic
health. But there is a hue and cry over "moral hazard" - the apparent
aim being to paralyze public action so as to leave outcomes to the
private markets that have (in the view of objectors, it seems) managed
economic affairs so masterfully in the last months. We must let nature
take its course, it is affirmed.

There are two problems with this
approach. First, it renders policy moot. There is little point in
electing or appointing a President or Fed chief if their main role is
simply to stand aside and let things happen. Second, the damage to the
economy is too dire. In any emergency, remediative action is the moral
responsibility of all involved, even if there is a good chance of
disaster remaining unaverted. And in this case, there is a good chance
corrective action can be effective - if it is correct.
Objectors
decry the rescue of the guilty at the expense of the innocent. They
declare there is no way to halt the collapse of the housing market
except to reward the bad behavior of irresponsible borrowers. But must
we punish every property holder to ensure that the market punishes the
guilty? Because that is the effect of the "let nature take its course"
option. Leaving aside questions of culpability on the part of lenders
who invented such ingenious instrumentalities as the "option ARM" and
the CDO, perhaps we should investigate the issue of saving the economy
instead of chastising the wicked. The matter is simple: how do we
intervene to halt the freefall of housing at least cost to the body
politic?