Tyler Cowen is a professor of economics at George Mason University. His blog, Marginal Revolution, covers economic affairs.

Of all the Obama administration’s economic plans, it is frequently acknowledged that the mortgage reform program – Home Affordable Modification Program, known as HAMP – has been the least effective. It has aided very few homeowners and has added layers of regulatory complications.

There is a common attitude of 'something must be done,' but not every problem can be fixed by further government tinkering.

The logical solution to an overleveraged housing bubble is mortgage principal reduction, which gives more homeowners positive equity in their homes and lowers debt loads. But that’s not going to work right now. There are no clear legal standards for whom should get aid, and it would lead to messy court battles that would stretch on for years, vitiating the need for clear rules of the game and the immediate purpose of macroeconomic revival. Most of all, Americans hate the idea that some irresponsible borrowers should get a break while others have to repay their loans in full. For all its virtues, the idea is a non-starter.

Government-backed refinancing is another option but it puts a lot of fiscal risk on the public sector. Mortgage rates are already very low, so if a borrower can’t currently get a loan maybe he or she really is a risky prospect, given the continuing volatility of the economic environment. Our government already has been burned by its involvement with the mortgage agencies, so it hardly seems time to replicate that experience on a larger scale.

It’s an unpopular answer, but the best thing for government to do right now, for the housing market, is not very much. Prices may have reached their bottom in any case. A better monetary policy still could improve the economy and wise investments in human capital will pave the way for longer-run growth and new household formation. There is a common attitude of "something must be done," but the U.S. public sector already has screwed up housing, and not every problem can be fixed by further government tinkering.