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Stimulus-palooza: Here comes the next wave

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By Michelle Malkin  •  February 28, 2008 08:05 AM

You knew it was coming. Just like I warned here and here and here and here. Washington is on the borrow-spend-repeat cycle–and Democrats don’t want to get off. Harry Reid has proposed a “foreclosure prevention” act that would pile on billions of dollars more in stimulus-palooza spending on top of the $152 billion already passed into law and radically expand government’s role in meddling with private contracts:

U.S. Senate Majority Leader Harry Reid said on Wednesday he planned to defy a threatened White House veto and try to win passage of a bill to curb rising home foreclosures by changing bankruptcy law.

“I have no expectation of reaching any agreement with the White House,” said Reid a day after the administration warned the bill would need changes to get President George W. Bush’s signature.

“I have tried for seven years” to reach agreements with Bush on a variety of issues, but have repeatedly failed, said Reid, a Nevada Democrat, at a news conference.

“So we are going to do what we think is best for the country,” Reid said. “If we get 67 votes (in the 100-member Senate to override a possible Bush veto), that’s great.”

The Senate could turn to the housing bill in the next few days, but it must first overcome a possible Republican procedural hurdle that would take 60 votes to clear.

“I think we are going to get more than 60 votes,” said Reid, whose fellow Democrats control the Senate, 51-49.

Senate Republicans must draw a line in the sand:

The measure would let bankruptcy judges erase some mortgage debt and provide billions of dollars to rehabilitate abandoned properties. The White House said the bill was too costly and an unacceptable bailout for lenders and speculators. It had been expected to be taken up Tuesday by the Senate, but got pushed back for consideration of an Iraq measure.

Reid said he opposed dropping the controversial provision to modify present bankruptcy law by letting bankruptcy judges erase some mortgage debt. He said the bill has drawn support from community banks and credit unions.

House Democrats are pushing for $15 billion more in spending to “rescue” borrowers and $20 billion more for the government to buy up homes. Stop them:

In the House of Representatives, another key Democratic lawmaker is crafting a plan to provide about $15 billion to help a million troubled borrowers, an aide said on Wednesday.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, is developing the proposal which would involve the Federal Housing Administration and government purchases of distressed mortgages.

The five-year plan would apply only to owner-occupied homes and exclude investor-owned and second homes.

Frank is also working on another plan to provide as much as $20 billion in grants and loans to buy foreclosed or abandoned homes at or below market value.

Anyone who has paid attention to the Fannie Mae and Freddie Mac racket should balk at the prospect of this massive takeover.

The OMB responds to the Dems’ proposals:

The Administration understands that H.R. 3221 will be amended on the Senate floor by the substitution of the text of S. 2636, the Foreclosure Prevention Act of 2008, as introduced by Senator Reid. Earlier this month, Congress and the Administration worked expeditiously to pass the Economic Stimulus Act of 2008, a robust economic growth package that will put $152 billion into the hands of American individuals and businesses in FY 2008. When the President signed that Act, he stated that Congress can further assist the housing sector by passing legislation quickly to modernize the Federal Housing Administration (FHA) and reform regulatory oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. These bills have bipartisan support and are the appropriate next steps to address the housing downturn; Congress needs to make these important bills an immediate priority. As discussed below, the Administration strongly opposes many of the provisions in S. 2636 as unnecessary, costly, and counterproductive. If S. 2636 were presented to the President, his senior advisors would recommend he veto the bill.

The Administration strongly opposes the provision of S. 2636 that would appropriate $4 billion for assistance to State and local governments for the redevelopment of abandoned and foreclosed homes through a new program in the Department of Housing and Urban Development (HUD). In addition to being extremely costly, this new program would constitute a bailout for lenders and speculators, while doing little to help struggling homeowners. This new program would also be slow to expend money and thus would not provide timely stimulus or immediate relief. In fact, it is more likely that this proposal would prolong the time it would take for the housing market to recover.

The Administration also opposes more than tripling the funding for the Neighborhood Reinvestment Corporation (NRC) in FY 2008 from its FY 2007 funding levels. Such an increase would tax NRC’s capacity to effectively administer its programs, given that NRC has already received a 156 percent increase from its FY 2007 funding level.

The Administration strongly opposes providing bankruptcy judges with power to modify the terms of mortgages for debtors in bankruptcy proceedings. Amending the bankruptcy code in this manner would undermine existing contracts, leading to contraction in mortgage credit availability and affordability. These and other bankruptcy-related provisions in the bill would rewrite long-standing tenets of bankruptcy law in ways that would fundamentally alter the expectations of parties to hundreds of thousands of home purchases after the fact. These provisions would also likely prolong the time it will take the market to recover from the current downturn.

The Administration proposed and supports a number of initiatives that are designed to help homeowners through the Nation’s subprime mortgage crisis, including the HOPE NOW alliance, FHASecure, increased funding for housing counseling, and reforms to the Real Estate Settlement Procedures Act (RESPA). The Administration supports the Federal Reserve’s proposed rule to improve disclosure requirements and develop new national standards for unfair and deceptive practices through its authority under the Home Ownership and Equity Protection Act. In addition, the Administration endorses the actions of the Federal banking regulators to improve underwriting criteria. The Administration looks forward to working with Congress on legislation such as FHA modernization and Fannie Mae, Freddie Mac, and Federal Home Loan Bank regulatory reform already moving through the legislative process.

Treasury Secretary Henry Paulson signals his opposition:

The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners.
[Henry Paulson]

In an interview yesterday, Treasury Secretary Henry Paulson branded many of the aid proposals circulating in Washington as “bailouts” for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers.

Mr. Paulson’s comments came amid signs that the nation’s housing market is getting worse, not better. Indeed, at a House hearing yesterday, Federal Reserve Chairman Ben Bernanke kept the door open to further interest-rate cuts to boost the economy, even as he warned that inflation pressures have intensified in recent weeks.

President Bush and other administration officials have voiced skepticism before about a major government effort to ease the burden of the nation’s housing slump. But Mr. Paulson’s comments are the most explicit to date in laying out the administration’s opposition to the recent spate of rescue plans.

Mr. Paulson, citing estimates that as many as two million Americans could lose their homes to foreclosure this year, predicted that the administration’s market-based approach will be enough to keep the situation under control. Its centerpiece is a plan that encourages the mortgage industry to voluntarily ease up on certain borrowers.

“I don’t think I’ve seen any scenario where the American taxpayer needs to be stepping in with more taxpayer dollars,” Mr. Paulson told The Wall Street Journal.

Message: H-E-DOUBLE-L NO!

***

Related:

Michael Jackson is facing foreclosure, inspiring Kevin Depew to rewrite “We are the World” for potential bailout recipients everywhere…

We are the Foreclosed
We’re the defaulters
We are the ones who make a brighter day
For subprime lending
There’s a choice we’re making
To simply walk away
It’s true, our debt has gone away
We’re clear and free

When you’re down and out
And nothing seems to sell
But if you just believe
We’re much too big to fail
Well, well, well, well, let us realize
That the bailout soon will come
When we stand together as one

[Chorus]

We are the Foreclosed
We’re the defaulters
We are the ones who make a brighter day
For subprime lending
There’s a choice we’re making
To simply walk away
It’s true, our debt has gone away
We’re clear and free

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