United Liberty

Imagine you’re the president. You’ve had a tough year, your approval rating is at 41%, with voters disapproving of your handling of foreign policy and the economy. Your “stimulus” bill has been a failure. And your party is expected to have a rough go of it in the mid-term elections, just three months away.

So, how do you get voters back on your side? Have government-backed lenders forgive a portion of debt owed by homeowners:

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie.

Democrats need something to gain back some support. This would certainly give them a much needed boost, even though it’s dishonest vote buying in an election year.