Sinking in the polls and facing the largest wave election since 1946 (a GOP gain of 55 House and 12 Senate seats, see Ashbrook.org), the Obama administration reportedly isn't waiting for October. Instead, as several sources report, the president is planning an August surprise and deal a "fairness card" (again, turning the language on its head); a Main Street bailout rather than a Wall Street bailout (which he engineered, though he blames it on Republicans). The reported plan is that Barack Obama will instruct Fannie Mae and Freddie Mac, which he the federal government now owns, to forgive up to 20 percent of underwater mortgage balances (see Liz Peek wowOwow's sheconomics blog). Forget redistribution of wealth and spreading the wealth around. Just outright order it to be given away. 

As usual with this misguided regime, there's a better idea. Writes Capitol Securities Management Chief Economic Strategist and Managing Director Kent Engelke in his daily Early Morning Commentary today:    

There are rumors that on or about August 17 the Administration will propose up to a 20% deduction of any Freddie Mac, Fannie Mae or FHA mortgages balances that are underwater. In my view this would cause a political firestorm on both sides of the political aisle.

Instead of taking this radical step, I propose the doubling or tripling of the mortgage interest deduction for all home owners for the next two years. Yes this change would create a revenue shortfall but it will increase the monies in consumer’s pockets which should in turn increase housing prices and stimulate economic demand.

Engelke notes that such tax credits have worked in stemming, or even turning around, previous bubble-caused crises. For example, about eight years ago, the Congress and president approved an "accelerated depreciation schedule for many capital expenditure items purchased between 2001 and 2003," which accelerated the recovery in the aftermath of the dotcom bubble. 

Something needs to be done — and fast. Families are hurting. Weekly unemployment claims jumped again today, even above an upward revision of last week's increase (CNNMoney.com)! Yet, the only answers — all devastatingly wrong — from Washington's liberal, left-wing leadership are more taxes, more borrowing and blowing it all on redistributionist themes. Remember when Nancy Pelosi said unemployment benefits create jobs? (See Neil Braithwaite at American Thinker.)  This new plan exceeds that.

Forget those who struggle and play by the rules and make their payments. Those who don't apparently will just get it for free, except that nothing is free. Instead, homeowners, already struggling, will have to pay twice.