Hypocrisy That's Hard to Bear

This doesn't need to involve Hillary Clinton's across-the-board rate freezes and foreclosure moratoriums. Nor does it require the Federal Reserve to step in and purchase billions of dollars in mortgages and mortgage-backed securities.

At the same time, it probably isn't going to happen just by relying on the voluntary program worked out between the Bush administration and the mortgage finance industry.

The best proposal on the table is the one offered by Barney Frank, chairman of the House Financial Services Committee and far and away Congress's best bipartisan dealmaker. Frank's proposal has a combination of carrots and sticks designed to get lenders to take their losses by writing down loans to a level that reflects the current value of the home and the income of the homeowner.

The stick includes the threat of a forced workout through the bankruptcy process, which under current law excludes home mortgages.

And the carrots include a new program run by the Federal Housing Administration that would refinance these troubled loans with fixed-rate mortgages at 85 percent of the current value of the property. The FHA, in turn, would be authorized to package and auction off these new government-guaranteed mortgages to private investors.

There are lots of interesting variations on this basic proposal floating around: limitations on the bankruptcy option to prevent abuse and dampen its impact on mortgage rates; secondary liens that would give the government, or the old lender, a share in any capital gains on the house when it sold; tax incentives to encourage lenders to take the write-downs. A federal backstop the mortgage auctions in case private investors decline to participate.

Normally it would take Congress years to process a proposal that raises so many ideological issues and touches on so many well-financed special interests determined to wage a fight to the death over every little detail.

But these are not normal times. They are desperate times that require decisive action and creative leadership of the sort already demonstrated by the Fed, the Treasury and Frank. But most of all they require Max, Chuck and other members of Congress to put aside their grandstanding, their petty prerogatives and their partisan bickering and demonstrate a quality that's been sorely lacking in Washington in recent years -- a capacity for enlightened and constructive followship.

Steven Pearlstein can be reached atpearlsteins@washpost.com.