I wanted to address this complaint, a feature of discussions about the housing crisis from the very beginning, actually the source of Rick Santelli’s proto-tea party rant.

The only other thing I can think of that the administration screwed up seriously is mortgage reform. Again, though, that would have been politically difficult even if they had played all their cards perfectly. Like it or not, the American public hates the idea of seeing their neighbors get bailed out from stupid mortgages. It makes them feel like saps: we scrimped and saved and bought a house we could afford and we’re getting nothing. Joe and Betty down the street lived the high life, took out a NINJA loan they knew was way more than they could afford, and now they’re getting a taxpayer-funded bailout and living easy. That’s not a vote getter.

I guess my answer to this is that the American public hates not having a job more. They grouse about the deficit, they grouse about their neighbors, but they really grouse about not having a job. This animates the public mood that gets channeled into elections, anyway.

As Armando said, the Obama Administration made plenty of choices – are still making plenty of choices – that are at the root level unpopular, designed to save and grow the economy. They bailed out the banks for this ostensible purpose, and it was cheered on by… the type of left-leaning pundits who say you can’t bail out homeowners because it will make people angry. There’s a bow to public opinion in the one sense and not in the other. The consistent statement is this – any action that will eventually lead to economic recovery is the right action from a policy and political standpoint.

And indeed, the housing and foreclosure mess is a lead weight on the top of the economy right now. If you let this work itself out without imposing some mass modifications, you will have no growth, a housing lock that causes a mismatch in employment, millions of people displaced and shunted to the far corners of the economy, and a housing market that will continue to decline. You can say “let the market clear” but the cycle has become self-perpetuating: more foreclosures leads to more job loss leads to more foreclosures.

And this is a slightly different issue, but right now we have outright fraud in the housing market, which can perhaps only be solved with mass modifications brought forward by judges to clarify the title ownership and the standing to foreclose. This isn’t even a question of whether to do so anymore. It’s a question of how to do it. You just feed homebuyers into a wood chipper if you let them buy a foreclosed home in a market with such confusion.

Bruce said he has challenged banks in court to prove they are the owners of the mortgage with a right to the house.

He sees such cases as more of a public service, he said, because the banks have been so sloppy and arrogant.

It forces them to clean up their mess. The biggest problem, he said, is that the banks could resell the house without holding clear title — leaving the buyer without clear ownership.

“The banks say just because we’re a big bank, we’ll be here and you can trust us, we’ll clean it up,” Bruce said.

Ojile said he has defended five cases since April in which banks haven’t had proper documents.

“It’s a huge, incredible mess,” Ojile said.

There are add-on effects to a foreclosure moratorium. There are also add-on effects to letting buyers and sellers do business in a toxic market. What voters will respond to, getting back to the main argument, is a solution that cleans up the mess. Cowering from a solution that favors homeowners while being indifferent, or outright pleased, with a previous solution that favors banks, doesn’t make any sense to me.

UPDATE: Herr Krugman gets this right: the real reason for inaction, then and now, wasn’t a fear of public opinion, it was a fear of hurting bank profits:

Surely this can serve as a generic statement:

As NAME ISSUE HERE has come to light, the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.