WASHINGTON -- After inheriting the worst economic downturn since the Great Depression, President Barack Obama poured vast amounts of money into efforts to stabilize the financial system, rescue the auto industry and revive the economy.
But he tried to finesse the cleanup of the housing crash, rejecting unpopular proposals for a broad bailout of homeowners facing foreclosure in favor of a limited aid program.
During his first two years in office, Obama and his advisers repeatedly affirmed this carefully calibrated strategy, leaving unspent hundreds of billions of dollars that Congress had allocated to buy mortgage loans, even as millions of people lost their homes and the economic recovery stalled somewhere between crisis and prosperity.
The nation's painfully slow pace of growth is now the primary threat to Obama's bid for a second term, and some economists and political allies say the cautious response to the housing crisis was the administration's most significant mistake.
"They were not aggressive in taking the steps that could have been taken," said Rep. Zoe Lofgren, chairwoman of the California Democratic caucus. "And as a consequence they did not interrupt the catastrophic spiral downward in our economy."
Obama insisted the government should help only "responsible borrowers," and his administration offered direct aid to fewer than half of those facing foreclosure, excluding landlords, owners of high-ticket homes and
The administration did not push for legislation to make mortgage companies help borrowers. The financial incentives it offered were often insufficient.
The result was a plan that failed to meet even its own modest goals, data shows. Obama said in Arizona a few weeks after taking office that the government would help "as many as 3 to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure."
As of May, 4.3 million people had applied for aid, but only 1 million had received government-sponsored modifications, according to the most recent data. The government has since enriched incentives for companies and found new ways to press them to take action.
More people are getting help, and the housing market has finally begun to recover, leading some of the president's allies to wonder what might have been.
"If the program they have now had been used at the beginning, it would have had a tremendous impact," said John Taylor, chief executive of the National Community Reinvestment Coalition, an umbrella group for housing advocates.