Released: April 03, 2008

Wrong relief

Source: Washington Post Editorial (Free Registration)

Democrats and Republicans in the Senate have joined hands and are marching to rescue the U.S. housing market. Far be it from us to rain on this bipartisan parade, which would marshal such measures as tax incentives for buying foreclosed homes and expanded mortgage revenue bonds. But the mere fact that both parties agree on "principles" to deal with the mortgage problem does not guarantee that those principles are valid. In the case of at least one proposal reportedly included in the Senate package, bipartisan support actually seems to prove the opposite. We refer to the awful idea of extending the tax code's current "carryback" provisions for net operating losses. And who would be the biggest beneficiaries of this new tax break (estimated cost: $6 billion)? Well, a good guess is the folks who made money hand over fist during the housing bubble but have been losing money at the same rate since the subprime mortgage market collapsed last year: the home construction industry and Wall Street firms such as Merrill Lynch and Citigroup.

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