Lending crisis

When the subprime mortgage industry imploded several months back, spawning a nationwide wave of home foreclosures, members of Congress did an admirable job containing their collective urge to throw piles of taxpayer money at the situation.

Instead, a handful of lawmakers advocated using the threat of increased regulation to force lenders to refinance their loans and help millions of people remain in homes they can't afford. A couple of congressmen declared there was no support for a taxpayer bailout.

But as the weeks wore on, representatives realized that having government clamp down on the mortgage industry would inevitably limit the availability of loans to the high-risk borrowers they were aiming to help. Such an approach would leave untold numbers of financially struggling homeowners hunting for apartments and unable to ever again achieve the American dream.

So it's back to Plan A. Sen. Jack Reed, D-R.I., has introduced legislation to pour $615 million into foreclosure-prevention programs, grants and loans for homeowners who can't make their mortgage payments.

Sen. Reed, chairman of the Senate Securities, Insurance and Investment Subcommittee, said his bill "is targeted relief that will help more families keep their homes and save communities nationwide millions of dollars."

It's difficult to determine which component of Sen. Reed's plan is more insulting: the idea that spending $615 million would save the country a few bucks, or the new mechanisms of federal redistributionism the bill would create.

Most homeowners sacrifice to make sure the mortgage is paid every month. And if they want to refinance their loans to enjoy more favorable terms, they must come up with thousands of dollars in cash or sacrifice some of their home's equity to cover the fees. A better deal never comes free.

Unless, of course, you haven't been making your mortgage payment. Sen. Reed wants to make whole those with poor credit scores, unstable employment histories and high levels of debt. And he wants you to pay for it. Even if someone is living beyond his means and has chosen to make his mortgage payment a lower priority, Sen. Reed wants to offer subsidized counseling and refinancing.

The subprime mortgage collapse is a product of our free-market economy. Investors decided to take risks on borrowers who couldn't qualify for conventional loans. Millions of Americans willingly signed contracts and moved into homes they clearly couldn't afford. It has been painful to lenders and consumers alike, but the market is correcting. It is healing itself.

And that process will move along more quickly if Congress stays out of the way.