Obama's Full House

President Obama unveiled his mortgage plan for the country, a $75 billion effort to keep 9 million American homes from foreclosure.

While still voluntary, the program contains a mix of carrots and sticks for mortgage servicers and investors, both of whom have been seen as resistant to modifying loans. The program would not only give servicers $1,000 for each modification, but would give them another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

But the administration is also wielding a big stick. It will work with Congress to amend bankruptcy laws to allow judges to modify mortgages, a step community advocates say is badly needed but that the financial industry abhors.

The bankruptcy law changes are a vital component of fixing the problem, and if the financial industry hates it, too bad. Bush should have done this six months ago, but he was too busy being a moron.

In his speech in Mesa, Ariz., a community hit hard by the mortgage meltdown, Obama laid out how foreclosures hits more than just the troubled borrower. Seeking to drum up support from those who are paying their debts, Obama said that the downturn in the housing market has claimed many companies and jobs. This, in turn, has hurt state tax revenues, which means less money for schools and other public services. And, he said, it has made it harder for everyone to get credit.

"In the end, all of us are paying a price for this home mortgage crisis," Obama said. "And all of us will pay an even steeper price if we allow this crisis to deepen -- a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit."

He's right, but we also have to remember that manipulating the housing market is how we got into this mess to begin with. Caution is needed here, and artificially boosting home prices may cause us much more headaches down the line. Still, to fly a crashing plane, you have to at least get the thing to level off first, and we're still nowhere near the bottom of the housing market (and the commercial real estate market is only just beginning to crash.)

Obama however is dead on that if the housing market doesn't at least level off soon, many more states will end up like California. Of course, mortgage plan or not, this may happen anyway.