Rescuing the housing market is harder than presidential politics would have you believe.

Federal Deposit Insurance Corp. Chairwoman Sheila Bair offered her own (more informed) plan in recent congressional testimony. She wisely emphasized the lack of a silver housing bullet but ultimately offered a plan that looks a lot like McCain-lite.

Under Bair's proposal, institutions that service troubled mortgages would receive loan guarantees from the Treasury in exchange for modifying loans for qualified borrowers. If a servicer agrees to convert an adjustable-rate mortgage into a fixed-rate loan with more favorable terms for the borrower, the Treasury would guarantee that the servicer gets paid in the event of borrower default.

The FDIC had some success with this model in its role as conservator for failed California bank IndyMac. Note, though, that IndyMac failed and fell under government control before the loan modifications moved forward. Bair's plan offers Treasury loan guarantees to servicers that are still above water-an element that may be viewed as a giveaway to banks that made poor lending decisions. It's also far from certain that troubled borrowers can make good, even on generously modified loans. As such, the plan may simply delay inevitable foreclosures.

The primary emphasis on keeping people in their homes may be misguided. Some borrowers on the cusp can undoubtedly be helped to stay in their homes, but preventing foreclosures is less important than preventing their undue impact on house prices. The mess got started when house prices overshot on the way up. If we can prevent similar overkill on the way down, the number of price-related foreclosures will automatically decline.

There's no doubt that hard-working families were duped into taking on more than they could handle, but for every predatory lender there was more than likely a predatory or willfully ignorant borrower. An effective recovery plan need not make these borrowers and lenders whole. It should, however, limit the external damages from their bad decisions.

A good plan would keep foreclosures from fueling house price declines without preventing inevitable foreclosures from moving forward. It will also provide some short-term fiscal stimulus to the ailing economy.