Simmer down now!

The Bush administration is staying on message today as it tries to put a lid on suggestions that the government take a more radical (and costly) approach to propping up housing markets. The White House is rejecting such plans as "bail outs" for "lenders and speculators."

Speaking in Chicago, Treasury Secretary Paulson said that "while some in Washington are proposing big interventions, most of the proposals I've seen would do more harm than good. I'm not interested in bailing out investors, lenders and speculators. I'm focused on solutions targeted at struggling homeowners who want to keep their homes."

Paulson seems to be trying to quell speculation that the administration might get behind Sen. Chris Dodd's proposal to create a Federal Homeownership Preservation Corp. to buy up mortgages at a discount from lenders. Bank of America has reportedly expressed support for the idea.

As noted here Tuesday, the Bush administration has vowed to veto Senate legislation that would allow bankruptcy judges to rewrite the terms of troubled borrowers' mortgage loans.

At a press conference today, the President elaborated on an earlier White House policy statement, saying the proposal would "do more to bail out lenders and speculators than to help American families keep their homes" and "prolong the time it takes for the housing market to adjust and recover and it would lead to higher interest rates."

Bush didn't go into details, but the administration also opposes, on pretty much the same grounds, another provision of the bill that would provide $4 billion in state and local assistance for redeveloping abandoned and foreclosed homes, and a proposal to triple funding for the Neighborhood Reinvestment Corp.

Pressed further about the economic slowdown in general, Bush said the tax rebates authorized in the recently approved stimulus package will soon be in the mail: 

"I know there's a lot of -- here in Washington, people are trying to -- stimulus package two and all that stuff. Why don't we let stimulus package one, which seemed like a good idea at the time, have a chance to kick in?"

The administration's game plan for resuscitating the housing and mortgage markets continues to rest on voluntary workouts by loan servicers, and giving the Federal Housing Administration, Fannie Mae and Freddie Mac more leeway to guarantee and buy loans.

Problem is, FHA, Fannie and Freddie don't HAVE much leeway to do more than they're doing now. Congress has yet to pass an FHA modernization bill that would expand risk-based pricing, and Fannie and Freddie are actually shrinking their loan portfolios to meet regulatory capital requirements (which the administration could lift, but may be maintaining as a bargaining chip to get Congress to pass a GSE reform bill).

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