‘More harm than good’

Amid widespread panic and posturing in response to the country's housing slump, Treasury Secretary Henry Paulson is a beacon of calm and common sense.

Congress is proposing all kinds of costly interventions, ostensibly to relieve the hardships of subprime borrowers and upside-down homeowners at risk of foreclosure. However, various legislative proposals will also benefit investors who sought to profit from rapid appreciation by "flipping" properties; lending institutions that ignored basic underwriting standards by handing out money like Halloween candy; and folks who foolishly bought homes they couldn't afford.

Mr. Paulson, in a Thursday speech to the Economic Club of Chicago, questioned why millions of private contracts should become the responsiblity of American taxpayers.

"Most of the proposals I've seen would do more harm than good," he said. "I'm not interested in bailing out investors, lenders and speculators," he said.

Giving bankruptcy judges the authority to reduce interest rates and payments, allowing local governments to buy homes at risk of foreclosure and forcing taxpayers to subsidize refinance costs prevents these properties from reaching the market, where the pressures of supply and demand can help prices finally find bottom and hasten an economic recovery.

Keeping prices artificially high hurts those struggling to buy their first home. And burdening lenders with more mandates and regulations inevitably makes mortgages more expensive, even for the most credit-worthy.

Like Mr. Paulson himself, Congress must demonstrate a bit of restraint in crafting any foreclosure "rescue" package. Americans need the economy to get better, not worse.