The Rule Obama Forgot: “It’s the economy, stupid.” - TheFiscalTimes.com

The Rule Obama Forgot: “It’s the economy, stupid.” - TheFiscalTimes.com

The unemployment problem is secondary to the problem of mortgage debt. You could have thrown three times the stimulus at the economy - however with four million families owing twice what their homes are worth, the economy will stay flat until the housing bubble reinflates (which is unlikely, bad public policy and seems to be what Wall Street is hoping for) or until mortgages are either abandonned or modified. The mortgage modification plan the White House worked out had great potential - the problem was it was not mandatory and with the lack of cramdown authority on primary residences, banks have no incentive to deal (especially if they believe the bubble will reinflate - which is kind of pathetic). At the very least, the Federal Reserve, Freddie and Fannie should have been made to modify the mortgages on which they hold the paper. Until bankruptcy reform is repealed (unlikely unless done in the lame duck session) or TARP authority is used to have government held mortgages modified, the crisis will continue and McConnell may get his wish on making Obama a one term president.