Incompatible goals

There are rumblings in Congress about "doing something" about the current housing situation - usually something along the lines of making sure people can keep the houses they have "bought" and/or propping up the market to keep housing prices from falling.

The housing market is overvalued. Prices went up too high, and people were making gambles that their houses would appreciate enough before their exotic mortgages reset and blasted them with higher payments. Now, the gamble has not paid off and people stand to lose the houses they have put little or no equity in to (paying interest-only mortgages means you haven't paid off a dime of the house).

But I have also heard rumblings from Congress that "the American Dream is slipping out of reach," namely that housing is getting so expensive that the average worker can no longer buy a house. This is a direct result of the housing price boom. When things get very expensive, fewer people can afford it.

So Congress is in a pickle. If they work to keep people in homes they could not afford and prop up the housing market, they keep prices from falling and perpetuate the fact that people can't afford their houses. If they let housing prices fall, people WILL lose their homes, and it will get worse if, as some analysts believe, the market is 10-15% overpriced nationwide. If they create new and exotic programs to help people buy houses that are too expensive, housing will just continue to get MORE expensive as people are able to buy. If they just artificially push all wages up across the board, they introduce inflation and likely recession with a lot of sound and fury and accomplish nothing.

But Congress hates to appear as though it is doing nothing. And so it will meddle somewhere, and it will make things worse. But you won't see them talking about the invisible people harmed by their actions. And in 2-6 years, you will hear them decrying the plight of the individuals they caused incidental harm to by their previous meddling, and promising to fix that, too. And so the cycle perpetuates itself.