20120612-100601.jpgArticle of the day link: What is this talk of “carrots-not-sticks”?

Ah – nothing like election time to look back and reflect on past campaign promises. Soback in 2008, the Obama was all excited about the housing crisis and how he was we were going to fix it.

So let’s reflect. Back then, about one in five mortgage-holders owed more on their mortgages than their house was worth. Today, about one in five mortgage-holders owes more on their mortgages than their house is worth. Rousing success?

Well – it doesn’t seem to have gotten worse. Which frankly, given everything else, doesn’t seem to be such a bad achievement.

On the other hand – I think that the measures taken have followed the same tepid approach that has so characterised the Obama administration. Attempting not to spend political capital by equivocating: trying to incentivise lenders to forgive rather than doing something a little bolder. I mean – I’m all for incentives. But dammit – make a decision when it’s clear that nothing is changing.

If someone doesn’t respond to incentives, then you use negative re-inforcement. Which should have been clear from the beginning – what lender is going to respond to tokenincentives if it means that they have to take a hit on their income statement? No no no. Beat them first, then offer a sweetie to make the crying stop.

In some ways, this decision could have been more calculated. What has been accomplished? American homeowners are in the same position; the country is fiscally weaker; and the lenders are continuing as they are. This pleases nobody – not even the lenders, because they’ve not been able to go in and recover what they could.

Almost better to have done nothing than to have been half-assed.

At least then the lenders would have been on your side. And the housing market would have bottomed naturally, and maybe America could have been on the up rather than on the edge.

The real question is whether this is the benefit of hindsight? Not exactly. There’s a biblical verse about this – something about being either hot or cold, because the lukewarm will be spat out.

That’s ancient common sense right there.