WASHINGTON, Aug. 20 (UPI) -- The slow U.S. economy poses the main threat to President Obama's re-election bid, but observers said a cautious response to the housing crisis was a mistake.
Bailouts of banks and automakers have become seen as crucial to blunt the recession but the depressed housing market still is a burden, The New York Times reported Sunday.
"They were not aggressive in taking the steps that could have been taken," said Rep. Zoe Lofgren, D-Calif., and chairwoman of the state's Democratic caucus. "And as a consequence they did not interrupt the catastrophic spiral downward in our economy."
Obama said the federal government should help only "responsible homeowners" and his administration offered aid to less than half of the homeowners facing foreclosure.
Instead, he chose to rely on mortgage companies to modify unaffordable loans instead of having the government take control by purchasing the loans, which was advocated by his 2008 primary rival Hillary Clinton and his general election challenger John McCain.
As of May, 4.3 million people applied for federal help to modify their loans since Obama took office, but only 1 million had received government-sponsored modifications, the most recent data indicated. About a third of those rejected lost their homes, faced foreclosure or filed for bankruptcy.
Now the government has enhanced incentives for mortgage companies to modify their loan terms and found new ways to push them to act, the Times said. The changes led to more people getting aid and the housing market has begun to recover.
"If the program they have now had been used at the beginning, it would have had a tremendous impact," said John Taylor, chief executive officer of the National Community Reinvestment Coalition, an umbrella group for housing advocates.
Whether a more forceful response to the housing crisis earlier would have helped remains unknown, but administration officials argue that window of opportunity was relatively small because neither mortgage companies nor the government were prepared, the Times said.
"We operated at the frontier of what was possible," Treasury Secretary Timothy Geithner, whose department oversaw the housing plan, said in a statement. "These programs helped millions stay in their homes and millions more refinance to take advantage of lower interest rates."
