…it would be a shame if something should happen to it.

Gangsters threatening those who fail to knuckle under are rarely so unsubtle as Friday’s letters to two hedge funds from the Chairs of the House Financial Services Committee and its subcommittees. Based on an article in the New York Times, Rep. Barney Frank and company believe the hedge funds are impeding the foreclosure relief provisions of the Hope for Homeowners program.

What did the funds do? They reminded mortgage servicing companies that the mortgage holders must consent to modifications in mortgages.

The hedge funds apparently did not say they would, in fact, object to loan modifications. They simply asserted their right to consent. Indeed, it is hard to imagine the funds would not agree to “maximizing returns to all investors,” the stated objective of the “Hope” program. The issue seems to be whether investors who loaned money for home mortgages will have any voice in – or even be informed about – changes to the terms of the mortgages.

The House press release starts off by misstating what the Times reported, characterizing the action as instructing mortgage services to “defy” a national program and insisting on economically damaging foreclosures.

The “Hope” program is ostensibly voluntary, but you would not know that from the “outrage” of the House press release at what the solons describe as intolerable, “irresponsible, anti-social behavior.” Nor does the Committee stop with condemnation. They announce a hearing November 12 to call the hedge funds, and their trade association, on the carpet for having the temerity even to raise questions about the extent and conditions of particular refinancing decisions.

The Committee does not even wait for a response before issuing, in the same release, threats of “steps to compel” attendance and “much tougher legislation.”

Conservative reservations about government intervention in the markets arise in part from the fear that government officials may be tempted to coerce private actors. The House Committee’s hair trigger threats underline just these fears. The demand for “cooperation” under threat of legislative retribution is ugly. It is no way to save a country, even in a financial crisis.