1. Archive


Five years ago, President Bush was looking for someone to sell his tax cut to the American people. He selected John Snow, and installed him at the Treasury.

It was unfair to cast Snow, a former CEO of CSX Corp., in that role. But Bush needed someone to sell his plan.

Hank Paulson is putting Snow to shame. The current Treasury secretary is the ad man to Snow's salesman. Paulson comes up with a new marketing gimmick every month to promote the government-led, private-sector plan to help homeowners hang on to the homes they couldn't afford. All that's missing is a catchy jingle.

In the beginning, there was MLEC, for Master Liquidity Enhancement Conduit. The Wall Street humor factory was quick to provide its own acronym: More Losses Expected to Come.

MLEC was really a Super-SIV, or structured investment vehicle, designed to buy the assets of SIVs after their source of funding - the asset-backed commercial paper market - dried up.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. agreed, with some gentle coaxing, to start a proposed $80-billion fund to buy SIV assets to avoid a fire-sale liquidation.

Weeks passed. Banks failed to line up to sign up. First the size of the proposed fund shrank. Then its raison d'etre evaporated, as banks absorbed their SIVs onto their balance sheets.

Next Paulson came up with Hope Now (Despair Later?), an alliance to help a select group of subprime borrowers (those who were current on their mortgage payments) keep their homes by freezing mortgage rates or helping borrowers refinance.

The private-sector initiative, coordinated by the public sector (the Treasury), was a formalized process for getting borrowers and lenders to renegotiate the terms of the loan.

There are plenty of nonprofit groups that provide counseling to strapped homeowners. For example, the Homeownership Preservation Foundation, which joined the Hope Now Alliance in October and mans the phone hotline, has been in business since 2002.

Borrowers who took out loans they didn't understand to buy houses they couldn't afford are not surprisingly reluctant to contact their mortgage servicer. To the extent the government's public information campaign is encouraging homeowners to seek counseling to assess possible mortgage workout options, these initiatives are good.

A total of 869,000 prime and subprime borrowers were helped in the second half of 2007, including 217,000 loan modifications, according to Hope Now.

The latest entry in the government's ad effort is Project Lifeline, which sounds a lot more tangible than hope. Last week Paulson and six large mortgage servicers agreed to a 30-day freeze on the foreclosure process for homeowners 90 days delinquent on their payments. That includes those with subprime, Alt-A or prime loans.

The question is, would it have evolved in the same way without government gimmicks? Reckless or fraudulent lending is not a behavior the government should appear to be rewarding.