There seems to be a misconception going around about the purpose of housing finance rescue legislation in Washington. Many people, including, strangely, people in the financial markets who should know better, think that it’s all about providing relief to the distressed homeowner, and preventing a further drastic decline in house prices.

As far as I can tell the intent, rather, is to do nothing to commit the Federal Government to any dramatic increase in spending on support for the housing market. You can see this in the evolution of the Congressional Budget Office’s estimates for the cost of the Frank-Dodd bill to expand the activities of the Federal Housing Administration by empowering it to refinance mortgages at lower home values.