The much trumpeted housing rescue

On Wednesday, the Obama administration released guidelines on its plan to stem the collapse of the housing market with its “Making Home Affordable” initiative, or Homeowner Affordability and Stability Plan (HASP). The plan claims to offer “assistance to as many as 7 to 9 million homeowners.”

But on the way to the forum, a few changed occurred:

The newly-announced guidelines pertaining to private lenders make clear that the program’s primary aim is not to assist homeowners, but to further prop up the banks. The plan does not reduce the grossly overvalued debt homeowners owe banks. It will not affect homeowners “underwater” by more than 5 percentβ€”that is, those who owe more than 5 percent more than their homes’ current market value.

Not surprisingly, the plan immediately won the vocal support of the major banks, including Citigroup, JPMorgan Chase, Bank of America, and Wells Fargo.

They got what they lobbied (and campaign contributed) for

An Associated Press article pointed out the financial industry’s power in altering the legislation. “The changes bring the legislation closer in line to what President Barack Obama’s administration has sought and what the banking lobby finds acceptable,” the article notes. The Washington Post added that “the financial services industry, which has lobbied against the bill, fought for all [the new] provisions.”

Besides limiting the number ofΒ  people to qualify, the program now imposes hurdles on them to demonstrate financial hardship and makes court redress much more difficult.

In related news, Moody’s Economy Mark Zandy predicts that

It could be a decade before the Dow reaches 12,000 points again, the economy will grow much more slowly than the Obama administration envisions and larger, more controversial bailouts are likely to be coming soon.

And in light of Obama’s ineffectual actions, Krugman appears to agree

But this refusal to face the facts means, in practice, an absence of action. And I share the president’s fears: inaction could result in an economy that sputters along, not for months or years, but for a decade or more.

Which is why Obama is urging us to…buy stock, which is probably worse advice than “fly to fabulous destinations” that W gave us after 9.11. Somehow, I had to link the Alfred E Newman entry here