Bad medicine: Hillarycare for the housing market; Update…breaking 3:00pm Eastern…Bush to freeze interest rates for certain subprime mortgages for five years
Updates: Hillary wags her finger at Wall Street and now this from the Bush administration:
Congressional aides say the Bush administration has hammered out an agreement with industry to freeze interest rates for certain subprime mortgages for five years in an effort to combat a soaring tide of foreclosures.
These aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of as much as seven years and industry arguments that the freeze should only last one to two years.
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
The administration said that President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretrary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.
Behold the bipartisan politics of entitlement.
***
My syndicated column this week blasts both Hillary and GOP supporters of increased meddling in the housing market to “cure” the subprime mess. As usual, the “cure” is always worse than the disease. A snippet:
If you thought Hillary Clinton’s government takeover plan for health care was bad, wait ’til you see what she has in store for the housing sector. As always with the Clintons, the market is the problem and Big Nanny is the solution. Unfortunately for taxpayers, Hillary has bipartisan company in the Bush administration on this issue. Their election season prescription? Rewarding bad behavior. Punishing responsible behavior. Doing more harm than good.
In case you’ve been living in a cave, there’s a painful credit crunch underway. The culprit is the subprime mortgage — a species of risky home loans to buyers with dubious credit and income. Cash-rich lenders doled out the subprimes hoping rising home prices would compensate for any failed bets. But when housing prices started plummeting and interest rates began rising, many borrowers started defaulting. Insolvency looms for countless lenders.
Instead of letting lenders and subprime mortgage-holders suffer the consequences of their actions, politicians and grievance-mongers are riding to the supposed rescue. In a supreme irony, the very same champions of the needy in the Democrat Party who complain constantly about the lack of “affordable housing” are now fighting tooth and nail to keep housing prices high…
… Let’s boil this down to fundamentals: Why should the rest of us have to shoulder the burden because some buyers made poor choices, overextended themselves and bought more house than they could afford? Why should other business owners bear the costs of lenders’ failed bets? And why are falling home prices such a catastrophe to be “fixed” in the first place?
… Fiscal conservatives ought to be balking at Hillarycare for housing. But President Bush’s treasury secretary, Hank Paulson, is singing a similar tune. He proposed a new safety net to stem the tide of home foreclosures through a bailout plan for homeowners with bad credit scores. They’d be eligible for relief from paying hundreds of dollars in additional monthly payments when their mortgage rates reset. Those who have been responsible enough to maintain good credit, however, will be out of luck. In addition, Federal Reserve Chairman Ben Bernanke has proposed that government-sponsored mortgage enterprises Fannie Mae and Freddie Mac be allowed to raise their loan limits and have their debt explicitly guaranteed by the public dole.
Lawmakers on both sides of the aisle are colluding to protect the reckless and keep home prices high on the backs of prudent taxpayers. Who’ll bail us out from this perversion of the American Dream?
Rich Toscano has more on the “United States of Bailouts.”
We know where Hillary and the Dems stand. How about the GOP presidential candidates?
***
Mr. Shakedown, still milking the mortgage meltdown, plans a march on Wall Street:
Civil rights leaders including Jesse Jackson, founder of the Rainbow PUSH coalition, plan to hold rallies in New York City’s Wall Street district and at least six other cities to call for a corporate response to the “crisis” of surging home foreclosures.
As many as 2 million homes are at risk of foreclosure, Jackson said in a statement. The rallies will be held Dec. 10, and also sponsored by the National Association for the Advancement of Colored People and National Urban League. Other rallies will be held in Atlanta, Los Angeles, Detroit, New Orleans, Washington and Chicago.
Jackson’s plans show how the increase in delinquencies on subprime mortgages, some of which were the product of what Federal Reserve officials said were “lax” lending practices, is capturing political attention.
Like I said, they’re damned if they lend, damned if they don’t.
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they keep housing prices high, the property taxes stay high, as the houses sell for less and less the property tax goes down. as property tax is tied to the value of the home.. not a stretch to figure out why they want home prices high..
Another reason why we need to keep GOP liberals out of office (take note Giuliani and Huck supporters).
This angers me to no end. I knew housing was out of reach when many got greedy during the housing boom causing home prices to rise beyond the reach of the average American. These people took these risky loans knowing that in a few short years they could not afford their mortgage - probably thinking that they could just sell their home and make a tidy profit. This has priced more responsible people right out of the market. The government needs to stay out of this mess and let these numskulls take their hit. I fear that a government bail out will keep prices high causing even more grief down the road.
MM said it best:
“As usual, the “cure” is always worse than the disease.”
I used to say to my little sister “I’m not an ATM.” Apparently, I am and so are most taxpayers. Cash cows…
I object to the premise that the deadbeat borrowers are losing their homes. In order for it to be their homes, they have to pay for it. In these cases it is the banks that have paid for it.
Exactly, Mr. P!!!
exactly Uhangtight…..
& the Elderly, whose homes have been in their families for several generations, are loosing them because they can no longer pay the TAXES!!!…I heard this was a government plan to keep developers & investors ‘working’ (snark)……RIGHT!!?, All of these beautifully kept up houses & they are NOT on the Market….come on….no fair!
#4:
“I used to say to my little sister “I’m not an ATM.” Apparently, I am and so are most taxpayers. Cash cows…”
Dead on.
Reminds me of a quotation from Amity Shlaes’s book (about the Great Depression - I’ve just started it), “The Forgotten Man” - which in turn, is a quotation from a previous book or article from the early 30s, I believe - which, as paraphrased, goes something like:
A sees that X has a problem.
A wants to do something about X’s problem.
A talks to B about it, and B also wants to do something about X’s problem.
A and B decide that they should enlist (i.e., compel - my definition) C into helping to do something about X’s problem.
In the best case, C will be willing to help.
But, it doesn’t matter - C will be forced to help.
In the original piece, C - the one who works, prays, and pays - always pays - is the “forgotten man” - NOT X, the one with the problem that A and B want to do something about.
Again, as always, we poor slobs that keep the country running are gonna be the forgotten men (pace feminists), and are gonna be compelled to pay, and pay, and pay….
But, A and B will look good, and compassionate.
– Ronald Reagan, 1981
Words to live by. Enough said.
Since when did “Taps” become “Fanfare to the Common Man” for those of us who are musically diverse. (Not an insult, just I know many people will not know all music) Again, show me in the Constitution anywhere this right is granted to a centralized and corrupt federal government system and I will gladly shut up. Until then, they are all crooks in my books. Unfortunately, they not only have all the guns, they have my books. (Ask the IRS)
Social welfare? Yuk yuk ptooie! BAAD!
Somewhere in all of this mortgage mess is another important fact that doesn’t fit the MSM narrative. All we have heard over the past few years was how “real estate” was the new investment of choice, and the purchase of second homes, vacation properties, and rentals was a large part of the bubble.
So how many of these people are going to end up on the street? There is nothing populist about “investors” having a nanny state bail them out of a bad investment decision. How will they draw the line… ?
Today’s political folly is nauseating.
That statement supposes you have a reasonable definition of “affordable housing.” The democrat version actually means subsidizing slumlords to keep minorities in the ghetto and dependent on the government for all their needs.
How ironical? Whenever I hear or read about Hillary I get a sharp pain in my rear end.
These greedy lenders deserve what they get and may God help those who get kicked out of homes they should not have been in in the first place.
Nice article and analysis Michelle. I agree why should the 98% of homeowners who were responsible bought within their means and pay their mortgages on time suffer for the 2% that were given loans they should have never qualified for in the first place. The only ones to benefit from this bailout will be the greedy lenders. If I think about the taxpaying public that can’t afford to buy being fleeced it really starts to get the blood pressure up. As stated in your article why would anyone get upset about the drop in over inflated homes coming down to allow responsible families their opportunity at the American Dream?
“Civil rights leaders including Jesse Jackson”….
BWAHAHAHAHAHAHAHAHAHAHAHAHA!!
Surely you jest.
With such crooked politicians, bailout is always part of the business plan. Airlines, savings and loan, now mortgage lenders–reap your profits, and when things go bad, reap more profits from government bailout paid for by yours truly.
Oh, and I am able to pay these bailouts because I did not borrow more than I could pay for a house. This is my reward? From a fiscally conservative Republican? I don’t understand politics anymore.
All I need to see is where the “Rev” stands - and I am on the other side. Thanks Jesse…
For anyone who really wants to know how effective federal subsidies are I urge you to look at two individual cases.
Amtrak
Southwest Airlines
Funny how dem train tracks keep digging deeper into our pockets.
Funny how Southwest continuously makes profits without all of the subsidies enjoyed by the other airlines.
FULL DISCLAIMER: These stats were from before I left the US so it may have changed.
Old School Depression Ethic my Italian single-mother taught us.
~Never spend above your means.
~Always put money aside every month for the unexpected.
~If you don’t really need it, don’t buy it.
~ & finally,there is always someone or government branch that will steal your hard-earned money, therefore, depend on yourself ONLY! & always be prepared.
as for ol’Jesse….he needed an Italian Mama to slap him into honorable social conduct at a very young age. O well.
#21 — you got that right; and you know what’s great about Italian Mamas? They ususally have Mamas, and it don’t get any better than Italian Grandmas when it comes to swift behavior modification!!
The whole thing is ridiculous, but this particular piece troubles me.
I am opposed to any bailout, but to specifically aim to help those with bad credit over those that have maintained good credit… amazing. Appalling to think that this is coming from our Republican administration.
So, the lesson here is “don’t worry about understanding the terms of your mortgage, the government will bail you out if you screw up”.
On top of that: “Don’t bother worrying about paying your debt, either. We’ll ensure that those with bad credit get an extra bonus.”
I dunno, my Ma and Gramma were both pretty dang good at slinging iron skillets. I was kinda glad when I only got caught by my Pa, a cinch strap is a sight easier to live with IMHO.
Looking back, discipline has served me well in my life. Then again, if I would have known that it meant I would be paying for those who have none, I may have reconsidered.
Of all Bush’s appointees, Paulson got the only welcoming embrace from the polarizing Pelosi/Reid/Schummer/Frank Democrat congress.
Do you see why, now?
Jesse and Hillary share many things in common, duplicity, deceit and a strong belief in Marx - let them pay for it, both have money out of the country that can be used before they have me pay for other folks foolishness.
Exactly, why should the responsible pay?
Is this why my county commissioners first decided not to impose a property tax after 20 years without the tax and brought it back up and passed it under the table. My property tax went up $200.00 dollars.
I feel like I’m the only one in the world sometimes that doesn’t have a credit card. I’ve always stayed away from them, my philosophy is if I don’t have the cash then I don’t have it, unfortunatley that’s not how alot of other’s think. I continue to see people live beyond their actual incomes everyday, It really kind of baffles me.
Due to a $200.00 tax increase a portion of Christmas has pretty much been cancled at my house till after the first of the year.
But that’s the lesson Democrats seem to want to push home. If you’re responsible, you don’t deserve to have the things irresponsible people don’t.
As I’ve said time and again, the subdivision behind my apartment building has beautiful $500k+ homes in it. I’d love to live in one, and I could probably find a lender who’d give me a loan to purchase one.
Then I’d spend every night wondering where the next mortgage payment was coming from.
A co-worker told me a story about a family in a subdivision near her that bought a beautiful home and was later found to be going to the bathroom in the woods behind the house because they couldn’t afford the utility payments.
But irresponsibility is rewarded. Responsible behavior is punished.
Warren Buffet seems to think he doesn’t pay enough in taxes, why don’t we let him float the bill?
Iyou sure he just wasn’t an environmentalist?
It’s OT, so I apologize in advance, but Paulson is also a big ‘global warming’ believer. How did this guy get past us?
Perhaps this is all part of the plan?
Michelle, your piece echos what I wrote on the matter
I will add that what really bothers me about how she has behaved vis a vis mortgages is that it is in every way total and complete political calculation.
She saw the landscape and figured, very obviously I may add, that borrowers were going to be the most sympathetic group out of every entity involved in the crisis. She decided to side with them, because political, putting herself on the same side of the perverbial table made sense.
This is no different than a common sales technique that I was taught at the beginning of my career. I often put myself on the same side of the perverbial table with my borrower against a chosen villain, almost always the banking system.
It almost always works well. It can work well here, however it is pure politics and horrible policy.
Of course the buffoons who support meddling can’t see that the housing market correcting its bubble only means more average Americans can buy homes they can afford in the long run.
MissMarciLyn #22 & WarTip #24
I have a recent IMS (Italian Mama Story).
Mia Mama is 92 (my son takes her very seriously).
I can’t find the cell phone…I placed it somewhere. When I asked her if she had seen it….she told me to look in the Refrigerator…….OK!….but,know what, I already did! & no it wasn’t there.
Like Willie Sutton, Jesse’s headed to Wall Street because that’s where the money is.
Somehow I think Michele is more of a civil rights leader than Jesse Jackson. Where am I wrong?
THIS IS SO WRONG?
I give up.
So I should have gotten that low ARM because now it’s just a super low fixed rate?
Thanks for screwing over the people who made the right decisions.
Pretty much. It’s like a big kick in the nuts.
Just great. I don’t even own a house, but I am going to be paying for people who didn’t do the proper research into what an ARM is and the consequences when (not if) interest rates go up.
I do own a home and now this is a second mortgage payment….and I can’t deduct the interest payment on this one!!!
PBoiler,
your thought is more than merely cynical thinking. The fact is that if a bank actually followed through on Hillary’s course, that would mean that most borrowers with that bank that did have a fixed rate would scream bloody murder and would also demand a lower fixed rate. They would sue and they would probably win. What Hillary is suggesting falls under the category of moral hazard, and just one of many reasons why it is a bad idea.
Man this bad juju (the headline days bad medicine, but I can’t help but think bad juju instead.)
For anyone who really wants to know how effective federal subsidies are I urge you to look at two individual cases.
and let’s not leave out the Big Beantown Dig wartips!
Englishqueen01 #28 said “A co-worker told me a story about a family in a subdivision near her that bought a beautiful home and was later found to be going to the bathroom in the woods behind the house because they couldn’t afford the utility payments.”
Does a bear market sh#&t in the woods?
“The time to really worry is when these two pricks get together on something.”
– Louis Black
I’m on Michelle’s side on many issues but not this one.
Unfortunately, letting this situation self-correct could easily trigger an economic depression and then many of the “it’s not my problem” people would start losing their homes, too.
Don’t give up yet. I previously thought people who said it was time for citizens to stop paying taxes were crazy but when will we finally revolt in this country? We need to shove up govt’s a##. Collectively we can change these losers but it would take a big majority. We the people keep getting screwed.
This update on freezing the interest rates is disheartening. I suppose this is the part of ‘compassionate’ conservatism that is coming around to bite us on the arse.
I know I’ll be watching the legislature to see who opposes this. I’d also like to know what the republican candidates think about it.
Bingo. Same here. I suppose that we should throw good sense to the wind because now we’re paying the higher interest on a fixed and the sub-primers are safe from the risk that was inherent in their choice.
How is this not a step towards socialism?
Another concise critique:
http://www.fool.com/investing/general/2007/11/30/paulsons-plan-to-punish-the-public.aspx?source=iflfollnk0000003
“For evidence of how ugly things get when policymakers try to coddle the financial industry rather than let the market apply its harsher, faster, medicines, just take a look at how long the banking mess continued in Japan.”
Man, oh man, when are they going to get it? As an old friend of mine always says, “What you make on the popcorn you lose on the peanuts.”
Has anyone besides me re-financed in the last couple of years? I have a stack of paperwork a half inch thick concerning everything that had to be disclosed to me, and the process took hours, just initialing every page, and signing where necessary. Most of it was a blurr, except the part about how much the monthly payment is, and when/if it will change due to changes in interest rates. Does anyone really think that more government regulation will slow down the innovative spirit of unethical lenders?
I would submit that the mortgage industry is already poring over the proposed “solutions” to see how to get around them. Predatory lending is already illegal. Failing to disclose information about the loan is already illegal. Why not enforce the laws that already exist, throw some of these bums in the slammer, and the rest will get in line.
As I said in a previous post, one of the few remaining good things about our capitalist system is that you still have the ability to fail, whether as a consumer, or as a business. Once the government takes that away, we’re doomed.
Looks like W beat her to it!!!!
Thank you, President Bush. From here on out, I will take it upon myself to:
1) No longer honor contracts, as you have just, by your actions, made every contract in the US unenforcable.
2) No longer pay responsibly for anything (including taxes) as, by your actions, you have made any action you may take against me unenforcable.
You were worried about what would happen when @ 2 million lost their houses. You just signalled to 300 million that honor and your word are to be replaced with stupidity and government bail-outs.
Congrats, Mr President! You are as much of a buffoon as the press made you out to be!
I just finished my latest piece in response to the news, Here it is.
As an industry insider, I can tell you this is not merely something to be approached with cynicism, but rather something that is dangerous and potentially explosive to everyone.
This simply cannot happen or our entire economy is threatened.
Could W be much worse?
Oh yeah, JK.
Ugh.
Anybody else tired of compassionate conservatism?
Bush is running cover for the banker-scum. How Nixonian of him!
Seems the only way to not be taxed to death, to have freedom of speech, to get low cost health care, hell to enjoy that which is provided by the constitution in general, is to be here illegally.
First he wants to sell us out to the illegal invaders, next he demands that Israel commit national suicide to placate the Arabs, now he wants to reward big business for pushing loans on people they knew were not qualified for them. If not for Bush’s stance on the war against Islamic fascists I would be ready to join the impeachment crowd.
D*** it. Why should I, an apartment dweller who is saving money to afford a house on a fixed-rate loan, have to pay any money to greedy people who bought houses they couldn’t afford on an ARM? Can I get some of the handout too? Wait a second - who will pay for the handout for everyone? Warren Buffett, the man whose taxes are too low!
Boomer, join away. The President is training and equipping Palestinian-Arab terrorists; told Israel to end incitement and terrorism at the Annapolis conference; and at that conference, forced the Israeli delegation to enter through the service entrance so as not to offend the Arabs. For references for all of the above, see http://atlasshrugs2000.typepad.com/. He’s made his choice. And to think some people are still pushing Condi for prez.
These home owners did not sign their mortgages while someone was holding a gun to their head…… it is fascism to make everyone else carry the burden of their mistakes!
…in other news, President Bush today promised a 5-year rate moratorium on adjustable-rate mortgages (ARMS) on Iranian reactors. “We have to slow down the ARMS race” Mr. Bush said…
My God, this is a depressing day. I’m assuming this agreement will go through congress, where it will be made much worse. One of the rules of the American welfare state, is that the prices of houses and labor must never be permitted to fall — and to hell with the consequences.
This is a very bad decision, the effects of which are going to be dire. As usual, Bush has no interested in what will follow. I do not believe the man is capable of thinking five seconds ahead of anything he decides. He thinks he and the democrats will now join hands in progress for the good of all. After seven years he still has no clue how wrong he is going to be. Yes, I suffer from the right-wing version of BDS, but happily I am increasingly joined by my fellow fascists.
So the people who have already shown themselves to be poor credit risks will get to take advantage of the taxpayers’ generosity. Do you think that they’ll take advantage of this break sponsored (albeit unwillingly) by people like me who didn’t buy a larger house than I could afford and do something to change their ways, or will they take advantage of the smaller house payments to buy more electronic goodies, ratchet up their credit cards, and the like?
Remember what happened the last time government gave “free” money to victims after Katrina?
Michael Swartz
http://www.monoblogue.us
The main question I have is:
By what authority or power does the President or Hillary think they have to change the terms of privately negociated contracts?
I am on the edge of my seat waiting for the answer to this….
Marshall
Please DON’T FORGET THIS GUY. He needs help too.
No President has the authority to freeze already-established interest rates. But he could stop illegal immigration. Hmmmm
On December 5th, 2007 at 9:47 pm, Michael
This about saving banks money. Overall, a collapsing housing market benefits the poor. But you already know that, don’t you?
Michelle asks where the other candidates stand on this issue. I bet it gives them cold sweats. Suppose they come out against bailouts. Would anyone want to see this headline? “Candidate A to Foreclosure Victims: Drop Dead.”