Prometheus 6

That's corporations, not you. You're just a balance sheet entry. 

Perhaps the only provision that's more objectionable is the bill's $6 billion tax break for money-losing home builders -- who threatened not to give any more campaign money when they got shut out of the economic stimulus bill in February.

A Pro-Foreclosure Bill
The Senate's housing relief needs repair.
Monday, April 7, 2008; A16

WE'RE REALISTS. We know that legislation can involve a certain amount of moral and intellectual corner-cutting. But is it too much to ask that a bill called the "Foreclosure Prevention Act of 2008" not contain a provision that might, at the margin, encourage home foreclosures? Apparently so, because the bipartisan Senate housing relief package includes just such a measure.

We refer to a $7,000 tax credit (payable over two years) to anyone who purchases a foreclosed home within a year of the proposal's enactment. Supposedly, this would help clear the nation's swollen inventory of repossessed properties, thus propping up home prices more generally. Here's the catch. For lenders as well as borrowers, foreclosure is an expensive hassle. If at all possible, most banks would rather avoid repossessing a house, which they must then try to resell. But, by making it cheaper to buy a foreclosed house than a comparable unforeclosed property, the tax credit makes it more feasible to sell one. The cost and hassle -- for the lender -- of foreclosure go down, and the benefits go up. Other things being equal, lenders would be that much more likely to foreclose -- rather than to help homeowners stay in their houses on modified terms.

At a time when the Bush administration's voluntary mortgage workout program is struggling to show results, this is no time to be introducing perverse incentives, even marginal ones. Indeed, the $1.6 billion tax credit works at cross-purposes with the Senate bill's $100 million in foreclosure-avoidance counseling money.