It’s Not Just Santelli

The snippy White House press secretary would like us to believe that Rick Santelli doesn’t know what he is talking about. Unfortunately for the White House, Santelli does — and other people have figured out what is going on too. Joel Stein in TIME explains:

The only people affected by plummeting real estate prices are the ones who bought a house that cost more than they could afford, hoping for a spike in value so they could sell at a profit or take out a new loan based on an increased value. Their home wasn’t just a place to live; it was an investment they thought they could liquefy at will. If we’re saving these poor souls from the 26.7% drop in their investment, we should give twice as much aid to everyone who has lost approximately 50% in the stock market since its peak. Especially those in Vanguard’s Tax-Managed Capital Appreciation Fund.

In short, the entire purpose of the mortgage bailout is to help out people who made ill-advised economic decisions and aid them in escaping from the consequences of their decisions. It is not simply some misplaced sense of morality which cautions against this tactic. It is the realization that many of these people will still default after the government aid and that in the process we will have further impaired the stability of our banks and kept more credit worthy people out of homes. We will, in short, prolong and spread the pain.

Among the most dishonest statements in the president’s speech last night was his claim that his housing plan “won’t help speculators or that neighbor down the street who bought a house he could never hope to afford.” Actually, it will only help those people. (Even the AP figured this out.) The ones who bought the house they can afford and are continuing to make payments on it (regardless of the market price of their home) — over 90% of homeowners — don’t need to be rescued. And poor people (mostly renters) get nothing out of this.

If you believe taxpayer money is endless, there are no bad consequences from propping up overextended homeowners and an economic recovery can begin before asset values have settled out then the president’s plan seems like a grand idea. But more and more people are beginning to understand Santelli’s objections to the mortgage plan. The question is whether the president does.