James Pethokoukis
Politics and policy from inside Washington
An August Surprise from Obama?
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Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.
The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:
1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.
2) Wall Street banks are alerting their clients privately to this possibility. Here is what some are cautiously saying publicly. This from Goldman Sachs:
GSE policies are one of a dwindling number of policy levers the administration has left to pull, so it is conceivable that changes could be made, though there is no sign that a policy change is imminent. The Treasury’s essentially unlimited ability to provide financial support to the GSEs creates an interesting situation over the next twelve months: the GSEs could potentially be used to provide additional support for the housing market and, to a lesser extent, the broader economy in 2H 2001.
And this from Mizuho Securities:
As policy makers ponder their next move the data suggests that they face not only a stalling recovery but a growing risk of deflation taking root in the economy. As a result, the Administration has turned back to industrial policies by approving the purchase of a sub-prime auto lender by GM as a means for pumping up domestic sales, especially since the latest auto sales data indicates that consumers are still responsive to incentives. This precedent increases the risk that the government will use its control of Fannie and Freddie to increase consumer cash flow and juice the economy again.
Moreover, Morgan Stanley is pushing a mortgage relief plan directly to Congress. On August 3, a top Morgan Stanley economist recommended to the Senate Budget Committee that Fannie and Freddie ease their lending standards to allow millions of Americans to refinance their mortgages.
3) Keep in mind the political and economic context. The nascent recovery is already running out of steam. Wall Street economists just downgraded the government’s second-quarter GDP estimate of 2.4 percent to around 1.7 percent. And as even Treasury Secretary Timothy Geithner is warning, the unemployment rate may well begin to rise back toward the politically toxic 10 percent level given such sluggish growth. Many in the White House thought the unemployment rate would be dropping sharply by this point in the recovery.
But that is not happening. What is happening is that the president’s approval ratings are continuing to erode, as are Democratic election polls. Democrats are in real danger of losing the House and almost losing the Senate. The mortgage Hail Mary would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes.
4) And don’t think the White House is worried about financial market reaction. If they thought it would pass Congress, they would be submitting a $200 billion Stimulus 2.0 (3.0?, 4.0?) right now.
August is supposed to be a slow month for Washington politics. But maybe not this one.
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Government of the deadbeats, by the deadbeats, for the deadbeats
During the roaring 90′s my wife and I didn’t take vacations or eat out often so we could pay off our mortgage. We “sacrificed” because we didn’t want to owe anyone anything. Seemed like a prudent decision. Now the gubment is gonna reward people for making risky financial decisions? Up is down and down is up.
As usual, because I work hard, pay my bills on time and have a mortgage through a small bank I won’t qualify for any of this stuff.
I think I just made my last student loan payment.
Why don’t they just let people borrow money from the government at the bank rate? Why should I pay a bank 6% interest on my home loan when the bank gets the loan from the government for 0.25%? I should be able to pay the 0.25% directly to the government and cut out the money grubbing banks.
If you’re going to play that game then the only fair way to do it is to write a check to every man, woman and child.
So all of the families like mine who didn’t
go out to eat twice a week
go on expensive vacations
buy ipods and iphones
buy rims and jewelry
so they could pay their mortgage are going to get NOTHING
We are finished as a nation
Just before the election, eh? Those Washington guys are soooo corrupt! Sounds like he is trying to bribe us for our votes, just like he bought the votes of some Congressmen. Don’t fall for it.
Let me understand this.
The goverment passed laws so that people can buy houses with a income check.
So people bought houses without the income to keep the house.
Now the goverment want to give these people a goverment handout so they can keep thier houses.
Now when I bought a house, they allowed a mortgage up 2.5 of income. But I bought a house that equal my yearly income. I bought cars that got excellent gas milage. I added extra insulation to my new home back in 1980 to reduce my heating cost.
Basically throughout my life I live within my means.
I object to these goverment bailouts to people you bought more house, more cars than they could afford.
So let’s see if I get this right-some columnist from some alsoran website says he hears a rumor from the WallStreetBoys that the Obama administration is going to “order” Fannie And Freddie to forgive a part some homeowners upside down mortgages (which happen to be just as much if not more the lenders fault than the homeowner because they relied on the lender to be truthful about what they could afford) and all of you vultures want to start screaming at the Obama administration? They haven’t done it, they haven’t said they’re going to do it, they haven’t given ANY indication they’re going to do it, but you’re going to scream about. How about the rumor that if the Republi-CONS get control of Congress they’re going to pass a law requiring everyone to own a gun and go the Baptist church. Makes about as much sense.
Here we go again….destroying banks…home values and giving the American dream up to the lazy..entitled..Godless..illegal…for the tax payer to pick up the tab. Impeach Obama and his band of thieves.
Here we go again. THIS IS “OUR” MONEY. And they want to bail out people who falsified their loans information to buy homes…..AFTER they used OUR money to bail out the banks for the same reason. OUTFREAKIN’RAGEOUS……… What will it take to recover! Give us back our tax money…we’ll spend it..Cut out a few hundred military bases that do NOTHING. Cut out GIMMIE GIMMIE welfare programs…………. problem solved!
Absolutely INSANE! Rewarding irresponsibility and punishing responsibility. This administration is _proactively_ trying to de-construct our society.
Every day – the election of Barack Obama becomes a bigger and bigger nightmare. The hardworking, serious citizens of this country have been deemed worthless by this Administration – except for the tax revenue they can provide. The Dems under Obama have decided they want to rule yes RULE totally depended individuals – talk about slavery – that is their voter base – and Obama will continue to marginalize any clear thinking achiever – that does not want hand outs, or government control of their lives. Those of you that voted for Obama should have done more reading, more analyzing of his associations and his agenda – and not given your precious right to vote to this person intent on “fundamentally changing” this once great country. How about everyone paying the tax bill in this country decide their salaries are underwater and want to with-hold 20% from their tax payments.
It’s unfortunate that those of us who only bought a house we could afford will be bailing out (with our tax dollars) those who did not. Just one more wealth distribution tactic by the Obama administration…
Just who in the hell do these crooks think they are? The sob’s are giving away the farm to welfare AGAIN. This is outrageous. To all you non-voters from the last election, get off your collective butts and vote the b-astards out of office. We need to cut all taxes and have people make livings again. Not live in projects and use USDA food stamps to survive. Africa does not live like this, at least they kill or eat their victims.
As a poll watcher last time I saw the blind crippled crazy come out to vote for what is being called by the BO, mongrels. Well you people better get going or the farm will be gone and we will all be living in projects (formerly known as row houses). Yes, I am pis sed.
How did this county and common sense become non-existent. There are consequences for every action and this administration doesn’t have a clue what they have done and are doing to this country. When those on the take outnumber those of us who pay, life is over for all of us. I hope this stimulus doesn’t come to pass….
Just before an election, eh? It looks like he is trying to bribe us for our votes, just like some Congressmen were bribed. Don’t fall for it.
BO is not a King he is a mongrel and these are his own words. We need to rise up against the King again and for all the same reasons, they are taxing us to death, while they lie cheat and steal everything that is not nailed down. We have let race baiting work and we cannot even call a spade a spade anymore. Yes, the ‘of african decent’ gangstas are now acting like our while ganstas in washington, we taught them how to do it.
And the Socialist Regime continues to bankrupt this great country. That is one of the major tasks on this agenda.———-Why do you think F&F was not mentioned in the newly passed Bank bill? The libs and the non citizen do not want F&F to be regulated and to only take orders from them.
I tried to get an obamarefi, but because I make timely payments, I did not qualify—-
I hope the GOP screams from the roof tops over this.
One quick question—–why did the non citizen spend his birthday without his family???
Quit messing with the banks and housing market. Let them fall to the the level they want. We are doing the same thing Japan did 20 years ago.
Spend the money to create jobs. When people are working they will pay their bills.
Aimlow Joe was here.
http://www.aimlow.com
You want the economy to explode? CUT THE FEDERAL BUDGET 70%, CUT ALL TAX RATES 50%, CUT CORPORATE TAXES TO 0%, AND CAP GAINS TO 0%.
Then sit back and watch companies move here from overseas, watch people spend, watch businesses explode.
And it cost the taxpayers: $0
This
“Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth”
made me ROFLOL!!
A Federal Court would issue an injunction against any such thing about 3.867 seconds after the Judge finished reading the Complaint filed by the lenders.
That would be an unconstitutional taking of property without due process. The property would be the lender’s right to receive the money it is owed and the right to sue to collect such money (ie: us legal types call the contract to pay back the money an ‘intangible personal property’ and the right to sue to collect a transferable piece of intangible property – such as ownership of a debt which can be transferred – is called a ‘chose in action.’) Government can not take anyone’s property (personal or real) without going through due process aka the courts and in nearly all cases (except criminal forfeiture) paying compensation.
Thanks for a really good laugh! One can never ever underestimate the stupidity and gullibilty of the American public – and apparently the media and quasi-media bloggers.
We used to refer to someone who put 25% down on a home purchase as “responsible”, now we’ll call that person a “sucker!”.
What a bunch of CRAP!!!
People refinanced their homes to get cash out, spent it, got in over their heads on house payments, and WE have to bail THEM out????
God this pisses me off more than I can express in words.
I would qualify, but I DON’T WANT YOUR MONEY. Communism isn’t worth it.
Obama is out of control, and if he thinks he can steal from YOU to buy MY vote he’s smoking crack. (Again.)
Who is John Galt?
This is good news. There are millions of responsible homeowners paying their fully documented fixed rate mortgages on time who have underwater home values. Logic says that more people will start to walk away from their mortgages if there is no chance of ever recouping their investment.
The global economy was nearly ruined by investment banking and securities firms. The system was unregulated and rigged in favor of their huge profits. They have since been bailed out. Responsible homeowners who have not defaulted are still suffering.
This sounds like a good way to level the playing field and put a huge amount of consumer dollars back into the economy. Is it a ploy to get votes? Probably, but that’s the reality of our political system.
…. “that Fannie and Freddie ease their lending standards to allow millions of Americans to refinance their mortgages.”
Who really benefits from refinancing? That’s right BANKS. I work for BofA in loan processing and to see the crap that comes through for refinances is sickening. How about charging 5 points (5%) on a 100K refinance loan? The borrower will never see that money again — all for a loan that is 3/8% better than their original one. And the 5 points don’t include all the other costs like appraisal fees, doc fees, etc. etc.
WAKE UP AMERICA. When it looks like the government is trying to do something for you, look behind the curtain. With health care you found the big pharma companies, with this “mortgage bailout” it’s the big banks.
This is all about FRAUD and gimmie gimmie programs to buy votes for Libtard Scumacrats. They could care less what us tax payers want. They’re scum. Vote EVERY ONE OF THEM OUT.
How is this going to help all of the people still searching for a job? No job, no money to make house payments. I think mortgage payments should be frozen for at least 6 months. People in California, Arizona, and other places have been hit hard with regard to jobs and foreclosures.
Out-of-the-Box Solution for Underwater Houses
Simply put, several “underwater” homes and foreclosures mean houses are overpriced. To reduce foreclosures substantially, the Federal Government should require: 1) mortgage holders to share equity in these houses with homeowners in exchange for federally backed new financing; and, 2) the equity amount to be set as the underwater amount, be split equally between lender and homeowner, and become a secondary property lien paid-off only when the house is sold or refinanced “conventionally.” This approach is faster than waiting for market forces to play out.
Mortgage lenders and banks helped create the housing crisis by approving risky home loans (e.g., stated income programs) and bundling mortgages that were sold in packages as highly-rated securities. Borrowers took-on too much debt. Equity-sharing lets homeowners and lenders share responsibility for the crisis and future risks. For example, under a 40% equity-stake program, a house with a $500,000 loan balance that’s $150,000 underwater would qualify for a $300,000 new loan. The lender and homeowner would negotiate the $200,000 equity split. And local property taxes should be adjusted downward too.
Let’s look at “underwater” mortgages from the perspective that their mortgage, when paid in full, will be EQUAL to nothing more than a higher interest rate. That’s not so bad, considering where the rates are now. Get over it, keep the mortgage and stay put.
Some sensible plan to help people keep their mortgages through rough spots may be a better solution. Banks can’t continue to own more and more empty decaying properties.
Can I refinance my house for more than it is worth before Obama makes this happen, and I can then, my mortgage will go away as well. Well FUCK, might as well.
This is a scam if ever there were a million bernie Madoff’s…Another slap in the face for all responsible people in this world.
These will not produce one Job & how many kids to have to handover for the relief money ??? What about all the poor souls that had to give up homes in the last 2 years who because of Job loss had to leave those homes penniless…..All this is doing to make new Mortgages even harder to get….Remember if you have been unemployed in the last 3 years for even one month you still can’t qualify for a mortgage now even if you have 25% to put down….FACT… This is a Bogus cure all for irresponsibility….Damn this Man this is sooo Unamerican.
What about something for hard working intellegent who didn’t get themselves upside down by over purchasing on their home. The one’s that were smart enough to not let the realtor and lendor sell them something they couldn’t afford. We are not going to give up our house but plan on making good on the deals we put ourselves in. That is the honest and respectable thing to do. Shouldn’t we get some relief.
Maybe, just maybe this racist president and his liberal regime could do something for the hard working honest white man. Not very likely.
EXCUSE ME, IT HAS BEEN 8 MONTHS AND WE’RE STILL AWAITING A TAX CREDIT (FROM THE IRS) FOR OUR HOME PURCHASED in 2009!
The brainless and incompetent bureaucrats at IRS keep delaying/asking us to ‘send additional documentation’.
We did not overspend; we put 40% down on the house and still haven’t received a ‘home buyer credit’ from IRS.
The IRS issued check$ to hundreds of prison inmates (how did they even ‘qualify’ their paperwork?). Yet, IRS is holding back funds from those who actually bought a home.
This is misrepresentation by Congress, the IRS, and the banks.
Obama is a FRAUD.
My guess is this will be a bailout for ACORN Cul-de-sac instead of Main Street. The beneficiaries in many cases will be people who got their mortgages fraudulently ( illegal immmigrants, lied about their income, or both), could never pay the bills, and now by executive order Obama will give them freebies at taxpayer expense.
Oboama said his kind of “chnnge” won’t come from Congress and the courts, but rather by “administrative” actions. That is what we call “Presidential Decrees” when we refer to actions of third world dictators.
Without bothering to pass a law in the Democratic Congress, Obama evidently plans to personally make us taxpayers pay for his generosity to ACORN homeowners.
Folks, you voted for Obama, and we’re all stuck with him. Since he has also given us the ACORN Census, he will likely get elect4d by moving congressional seats back into blue state big city ghettos and fixing the electoral college for himself in 2012. Just a surmise.
Wow, is this really what happened to our free country? The people dont like this administration, so to prevent from being voted out they are going to bribe the people with some “free money”. That’s wonderful. Congress and the people are truely irrelevant. We need a revolution.
Nice strategy. Let me buy the votes from some, so I can continue with policies that constrain freedoms, increase government control, and increase taxes for most.
Cynical politics/policy at its’ worst, and also a sign of desperation to continue his “vision” for “change” in America.
I’ve been diligently trying to pay off my house for the last 8 years. I am SUCH A SUCKER!
Do you pay your bills on time? Yes, great, now you can pay for those that live above there means.
Nothing like rewarding those that dont take care of themselves and punishing those that do, but that is what the govenment is for after all (It says so right in the US Constitution, forget where though, im sure a Federal Judge in California can point it out)
This is crap. I feel sorry for folks who bought a house when the prices were higher, but that’s life. They signed a contract. I’d have no problem with a restructuring that involved lower interest payments, or a longer term, to make the economic downturn a little more palatable for them on a month-to-month basis, but now the government is going to re-write the sale price to better reflect the value of the house to a specific group? I don’t think so. If Obama is this desperate, he might just as well pick any aggrieved group and send them a nice, fat check, if he thinks it’ll make them vote Democrat in November. And if he does it, I think the blowback will be so severe that the Dems will do even worse. Why should my taxes pay for someone who either bought high, bough too much, or had no business buying at all?
Main Street will not get the bailout — Baltic Avenue will.
What is the point of working and paying my bills anymore? It clearly makes more sense to get fired from my job and go on never-ending unemployment, and selfishly spend all the money I have saved on stuff I don’t really need so that all the still-working fools can pay my bills. America has truly become a socialist disaster.
In order to pay down debt I had to raid my 401K, prior to turning 59 and a half. Both the Fed and State took 20 percent in penalty’s. Can I get the 20% back? I will promise to use it to buy stuff? US stuff.
Or how about limiting credit card interest rates to a maximum of 5%. That would help a bunch.
Thank you Mr. President
Is Obama NUTS!! The government has NO money. The country is broke. Unemployment is through the roof. The national debt is unpayable, and for the first time in our history could default. California, the 8th largest economy in the world is bankrupt and could bring down the weakened national economy all by itself.
Forgiving a portion of someones mortgage debt has NOTHING to do with those people being able to repay ANY of the balance. And BTW, what about the rest of us which have worked hard to buy what we could afford, and have made our payments. Would the government now explain to us why OUR TAX MONEY is being used to bailout the deadbeats and losers??
Let the housing marketplace come to a natural equilibrium. No more money for the Wall Street financial cowboys who are already paying themselves millions in bonuses. No more free homes for anyone. No more national debt. No more free loaders. No more Obama type lawyer-politicians. Enough is enough.
As a responsible person who saved money and put 40% down I’m screwed. I’m upside down but dealing with it. No bail-out for me but once again our tax money is going to be used to reward the irresponsible. Multi-million dollar corporations have received most of it and of course consumers are considered last. My work hours have been cut but no big deal. I still have some income to confiscate.
“But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.”
What “sidestepping” Congress SHOULD be showing voters is that we have a President who disregards the function of Congress. This is the beginnings of a dictatorship. Americans need to be very concerned about the dismantling of our 3-legged stool. When judges make law and presidents hand out the people’s money at their own pleasure, we no longer have the constitutional government we started out with.
The economy is weakening precisely because of the president’s policies. If he really wants to do something about it, then he should revert to the economic principles that actually work, i.e. cut spending and lower taxes.
Stop the bleeding now. Get the government out of the mortgage guarantee business. Those risks belong in the private sector where rational thought prevails. Kill this idea now. Forcing another 800 billion on the taxpayers dime is 800 billion in Freedom lost.