After any financial collapse, housing plays a key role in the hard slog that typically follows: a weak housing market feeds into a weak economy, which then feeds back onto a weak housing market. So even if the European banking system somehow avoids a meltdown, economic recovery in the U.S. will continue to languish unless we act more aggressively on housing.
No matter what the government might try to do to break the housing-economy cycle, the deleveraging process will still be painful and take some time. But that's not an argument against action; just because a headache can still hurt some even if you take aspirin doesn't mean you should skip the aspirin. One thing the Obama administration could do now -- probably with Republican support -- would be to attack the oversupply of housing stock by allowing a tax write-off for investors who buy empty properties and rent them out.
To understand why this would help, consider that the problems in the residential real-estate sector have two dimensions. First, we have an excess supply of owner- occupied housing, which puts downward pressure on prices. Second, millions of American households now have negative equity in their homes. Dealing with excess inventory by shifting vacant properties into the rental market would help to stabilize prices and thereby mitigate, to some degree, the negative-equity issue -- although additional action would also be warranted to attack such “underwater” situations.