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Obama threads a mortgage needle

If his plan doesn't curb foreclosures soon, he'll need to be like FDR and try again.

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In office 30 days and President Obama has already devised a stimulus package, a bank bailout, and now a mortgage rescue. Like Franklin D. Roosevelt, he has put government's shoulder into a falling economy. But also like FDR, he says he would end any program that doesn't work. For his mortgage scheme, he may want to keep his hand on the plug.

The $225-billion plan aims to help millions of homeowners either on the cliff of foreclosure or living in houses worth less than the mortgage. The real purpose, though, isn't a long-term social program but to put a floor under a housing market in a downward spiral.

If prices stabilize, then a value can be put on the bundles of mortgages held as securities by wobbly banks. Banks in turn will start lending again. The credit crunch will decrunch.

If lending and the economy revive in coming months, this taxpayer subsidy will be justified. Mr. Obama also claims the plan will keep all home values from sliding by $6,000 from current trends. If either promise doesn't hold up and the wave of foreclosures continues, the president needs to "do what works" and rethink his bailout.

At a practical level, the plan may be too limited or risky to arrest a housing slump that has yet to fall to its prebubble prices in most regions. For starters, it applies only to those living in their primary residences. About 40 percent of purchases during the bubble were by investors who aren't eligible for this bailout. And people with "jumbo loans" – generally in higher priced homes – also are not eligible.

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