So says the Washington Post’s Peter Whoriskey, David Cho, and Zachary Goldfarb: the Treasury Dept. and Federal Deposit Insurance Corp. are "nearing agreement" on a plan to guarantee the mortgages of millions of homeowners threatened by foreclosure. The plan would use between $40-50 billion of the $700 billion Congress gave Treasury in the bailout bill.  The money would be spread around to about three million homeowners and be used to lower interest rates, lower the total amount owed or extend the re-payment period.

The government has already spent $350 billion bailing out big banks so it only seems fair to help the homeowner. The president has threatened to veto the plan, which is usually a sign something is sound policy.

There was, though, at least one piece in the Post’s description that made me skeptical: government is wary of guaranteeing mortgages that are too risky. They won’t help homeowners who mostly keep up with their mortgage payments and they won’t help those careening toward foreclosures. Like Goldilocks (or like a commercial bank), they will guarantee mortgages that are "just right": risky but not doomed to foreclosure.

If I’m a homeowner who faces foreclosure, I got to be thinking: "If the government bailed out AIG, haven’t they lowered the bar enough to bailout me?"-MB

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