Democrats urging new mortgage guarantees

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The White House and congressional Democrats took turns today marching out ideas to either deal with the mortgage mess or prevent another one. Democratic support appears to be building for a new plan for the government to guarantee to as many as 2 million troubled mortgages.

First the administration, which focused its efforts today on avoiding mortgage problems in the future: The secretary of the Treasury rolled out a series of proposals for tighter regulation of the mortgage industry. The L.A. Times reported ‘... the package of proposals unveiled with much fanfare by the Treasury Department on Thursday was in large measure a call for greater self-policing by the financial industry. Treasury Secretary Henry M. Paulson Jr. portrayed the plan as part of a carefully calibrated push to bolster the system’s sputtering regulatory apparatus enough to deal with rapidly changing and highly unstable financial and mortgage markets.’

Then the Democrats, who announced ‘...a proposal Thursday for the government to guarantee as much as $300 billion in mortgages. In return, lenders would have to write down loan principals to reflect current values, which would help strapped homeowners afford their monthly payments. The measure is designed to help as many as 2 million troubled borrowers.’

‘The plan’s authors -- Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, and Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee -- said their measure would not involve the direct expenditure of taxpayer funds. But independent analysts said the offer of a government guarantee would put Washington in line to spend taxpayer funds if borrowers couldn’t make good on their mortgage payments.’

The Wall Street Journal: ‘Congressional Democrats moved closer to a deal yesterday that would allow the federal government to insure hundreds of thousands of mortgages, even for delinquent borrowers, in an effort to revive the housing market.’

More from the Journal: ‘Democratic presidential hopefuls Sens. Barack Obama of Illinois and Hillary Clinton of New York offered support for the proposal from the campaign trail.’

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