President Obama yesterday announced his plan to prevent home foreclosures, saying he wanted to be "very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans . . . And it will not reward folks who bought homes they knew from the beginning they would never be able to afford."The President's plan is predicated on the false belief that everyone deserves to own a home. The fact is that not everyone can afford to own a home. The efforts of Fannie Mae and Freddie Mac to make it easier for people to buy homes they could not afford are at the heart of the current financial crisis. Unfortunately, the President's plan does nothing to address this fundamental issue and instead just prolongs the crisis and leaving taxpayers on the hook.
We really do wish he were right. In fact, the details released yesterday suggest the President's plan will do all of the above. The plan will help some struggling homeowners. But by investing in failure, the Administration will also prolong the housing downturn and make financing a home purchase more difficult for future borrowers. Meanwhile, the plan isn't likely to slow the continuing decline in housing prices.
As CNBC's Rick Santelli correctly points out in this clip, this is an example of government rewarding bad behavior. Unfortunately it's the 92% of honest, hardworking Americans he refers to that will pay the price.