Hank Paulson throws more crap at the wall, hopes it sticks
Every time I read about a new Hank Paulson save-the-economy initiative (there’s a new one every day!), I think of Dory the fish from “Finding Nemo.”
Except when Dory sings “Just keep swimming, swimming, swimming,” I picture Paulson at his desk warbling “Just keep flailing, flailing, haw, haw, haw, haw, haw, haw!”
Anyhoo, the latest condiment on the crap sandwich is Paulson’s new plan to artificially prop up the housing market and boost sales by lowering mortgage rates to 4.5 percent:
The Treasury Department is contemplating a proposal that would cut mortgage rates for new loans for homes, according to the Wall Street Journal. The plan would employ Fannie Mae and Freddie Mac to offer mortgages with rates as low as 4.5%, roughly 1% lower than current rates.
The measure is under consideration as part of the Treasury Department’s continued effort to limit foreclosures, which has been at the core of the financial crisis. The plan would seek to revitalize the financial market without bailing out homeowners and lenders, the Journal reported.
As part of the proposal under consideration, Treasury would buy mortgage securities backed by Fannie Mae and Freddie Mac, in addition to those guaranteed by the Federal Housing Administration.
Fannie Mae and Freddie Mac guarantee a significant chunk of all new mortgages in the United States.…Conrad DeQuadros, an economist at RDQ Economics in New York, said lower mortgage rates should provide some support to the housing market by allowing cheaper financing to new buyers with solid credit profiles to the housing market. But he added that a greater impact would be felt if the proposal also permitted refinancing opportunities. However, he also expressed some skepticism about the extent of the impact.
“There is still a massive supply of homes on the market and consequent expectations of further declines in home prices may still keep buyers away,” DeQuadros said. “In addition, the weakness in the labor market appears to be intensifying and rising unemployment will depress housing demand and increase delinquencies. As with all of the Fed and Treasury programs, any new plan will have to be given time to work before judgment on its effectiveness can be made.”
Henry Blodget has a good analysis of Paulson’s latest effort at throwing crap at the wall and hoping it sticks: “Best case scenario, in our opinion, the new plan will slow the rate at which house prices are falling and make the ‘adjustment’ to the new reality less violent. It will probably also stretch out the time it takes the country to work through the crisis (by postponing the inevitable). Given the rate at which the economy is deteriorating, however, shallower-but-longer may just be better than deeper-and-shorter.”
I have said for the last 11 months (and many readers agreed) that we needed to just suck it up and let a natural correction in the housing market take place. Just get it over with. But the flailing feds are hell-bent on prolonging the pain and preventing the inevitable from happening for as long as possible.
What do they do? Just keep flailing, flailing, flailing…
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So just more of the same? Got it.
Don’t do something just stand there.
When your Ecomony is Based 1/3rd on Artificial Measures (AKA Gov’t Involvement)… It can’t fix itself. Unfortunately, after this whole mess finally ends….a full 1/2 or more of our economy will be based on artificial measures….the next time we are in this situation it will cost twice as much..
Both
PaulSkunkson and his policies are abject failures. Every time he opens his mouth, the Dow drops like a rock.Why the hell is this guy still employed?
God, please save us from the experts!
Wasn’t it mortgages with artificially low rates the problem in the first place?
Continue to allow people the opportunity buy more home than they can sustain?
This is Orwellian
BSR
Looking on the bright side, if this does happen, I will refinance to a much lower rate. (fixed of course). It would be the only part of the bailout to actualy do some people some good at the end of each month. So far this is the only part that has made some sense of some kind.
People with already foreclosed homes have more money sense than this poindexter.
Apologies to those with the surname ‘Poindexter’.
We need higher rates to dry up the money supply, so what do we get. Lower rates. Is everybody drunk but me?
Not if you got a fixed rate and could pay the bill. The arms broke the bank.
That was the real issue.
The man is clueless.
Also people were paying 750,000 for a house that was realisticly worth less than half of that. Or (and this is the really stupid one) borrowing against paid off houses. Looking at you dad…
I’m with sonofdy–if this goes through, I’ll refinance to take advantage of the lower rate.
Incidentally, I’m on an ARM right now, and it’s scheduled to start adjusting in 2010. Am I worried? No–I know it’s going to adjust, and probably upwards. But I also expect to either refi or sell & buy before then to avoid the adjustments. Proper planning means you can ride the system like a wave, rather than get pounded into the ocean floor.
I’m going to predict the future:
1) the Pig3 will get their money.
2) no one will make Paulson account for anything.
4) The Surpreme Court will throw out the appeal re: Obama’s birth certificate.
5) D’ohbama will get his blackberry back
7) There will be gay marriage.
9)The peoples voice will continue to be ignored.
I completely agree. If you had the guts, I think you could clean up in trading just based on when this idiot is scheduled to speak. Sell before, buy after, repeat.
Although you would just be called an evil capitalist for doing so.
Now CNN is trying to push the Big 3 sandwich through by regurgitating anew the old song about how cruel its failure would be on children, schools and teachers.
I’m so tired of hearing about the woe’s of teachers and schools.
I’m apparently in the minority here, but I don’t think this is such a bad idea. (There should have already been a natural reduction in mortgage rates based on the Fed’s actions.) I think this gives people in bad mortgages the chance to refinance and lower their payments and gives the rest of us a chance to put a little money in our pockets as well. It will certainly spur some new home buying while not really costing the govt any money… I agree it could turn out to be a short term fix, but I don’t really see the downside if it doesn’t work.
This clown has no idea what he’s doing, other than lining the pockets of his incompetent pals on Wall ST. Another strike against Bush and his inability to surround himself with qualified, honest, conservative, Americans.
aahhh yep!
From a personal viewpoint, I want them to lower the rates to 4.5% so I can re-fi my house for a lower payment. Knock wood – I’ve never been late on a payment and I’m loaded with equity. I have 10 years left on my 20-year mortgage and I just want the lower payment.
What’s wrong with that? What am I missing?
I read an article about it last night and it said the re-fi’s would be available for well-qualified buyers who have equity in their homes.
Well the only bad side would be if banks were forced by politicaly correct preasures to issue more bad loans to politicaly corrected classes but of course that would never happen right.
The best, or worst rather ARM I have come across in my work was with a client of ours who wanted a piece of property that bordered his business. The previous owners had just sold it to a family that after only a few months, was already in trouble. So our guy swooped in and basically paid the loan and got a mortgage on the house, knowing full well the family would not be able to make the payments to him for much longer.
The teaser rate was 7.8%. That shot up to 13.8% after 2 years. But the best part was it was a 30 year loan amortized over 50, so even if they made every single payment on time for 30 years, they still had a balloon of $196K (on a $210K loan) to pay at the end.
They were doomed from the start. Needless to say, we foreclosed within 3 months.
In the gun fraternity, that’s known as the “Spray and Pray” method. “Spray” enough bullets and “Pray” one of them hits the target.
Sounds as if he’s “Spraying” solutions and “Praying” one will work.
Paulson, 1% loans would be even better…
Even a broke watch is right twice a day.
until the various governmental agencies start shedding workers as the private sector is presently doing, we won’t get back into balance. the public sector is simply too big for the private sector to carry anymore. when i say public sector, i’m including k-12 public schools, local governments, county governments, state governments, and the free spending federal government which has been porking up these beaurocracies for 50 years. now we have 1 person on the dole or in government for every private sector worker. unfortunately, my recipient seems to weigh about a million pounds.
Agreed
I think that’s all self induced anyway, government schools have failed themselves, the children, the parents and the tax payers.
How about free money and houses for everybody? What’s wrong with that?
Better yet.. The Government can pay us to live in mansions!!!
If this countries schools continue on this downward trend, my twins will be educated in New Zealand. At 13 the STANDARD math is algebra. Here you don’t have to know what a2 + b2 = c2 means to graduate.
Well since we will be paying it off, why not? in the end it will be our money anyway.
Yes, finally a glimmer of tribute to those 95% who PAY their bills on time. We’ll likely refinance, too, if this comes to pass…even though we have a pretty good rate now.
/sarc on
Wonder what the criteria will be for obtaining the new lower rate? (must be behind @ least 3 months on mortgage, must have flat-screen TV/cable/cell phones for everyone in the home, new car in driveway, etc. /sarc off)
I still say it would be cheaper just to divvy up the bailout billions per household…but only give to those who have paid their bills on time. They can stimulate the economy in their own way, the remaining 5% would become irrelevant.
Paulson has shown everyone how clueless he was less than two weeks after he was granted his dictatorship over our monetary system. It was bad enough listing to Senator Dodd shooting his lying mouth off this morning when watching Fox Business News (about the only news I have watched since the election). What the hell do you expect Senator after giving one person this much authority with absolutely no over site.
I don’t know about the rest of you, but in our little slice of flyover country we have had enough of this Bailout Palooza. Oh! Goodie here comes Senator Dodd again on FBN getting ready to sweat the big 3 CEOs for some more Kabuki Theater.
ΜΟΛΩΝ ΛΑΒE (mo-lone lah-veh) Translation: Come and take them!
How true, this was decided weeks ago.
No, thankfully, it’s only for people who aren’t delinquent, have good credit, and have equity. Well, that’s me and I want it!
And I agree. So far, this is the ONLY thing that makes any sense.
But 1% would make 400% more sense
If the house is overpriced by 50%, lowering the interest rate won’t get it sold. The price has to go down.
WHY are loans like that even legal???
How does this help Obama’s kids’ auto manufacturing plant?
Nope, nothing in his noggin.
Why, or why won’t Hank Paulson just go away!
Paulson could improve the economy by simply doing nothing. But of course, he won’t.
I like Dora more than Paulson.
There is something Paulson could propose that would actually let the market self-correct – eliminate the mortgage interest deduction.
Houseplants thrive when you trim away the dead leaves. Paulson doesn’t seem to know this. Let the dying companies expire, so that the healthy ones may live. We’re going to go through this anyway; let’s get it over with.
Eliminating the mortgage interest deduction would definitely “change” the housing market but probably not in a way you would like. Every house in America, new and old, would decrease in value significantly, overnight. More people would be “upside down,” and more banks would become insolvent.
WarEagle – I disagree. The “price exchanged” for buying and/or selling a house would change – but not the value. When the price is helped artificially through taxation policy, it still hasn’t changed the value.
Further, interest paid deductions and interest earned taxation make little sense as economic policy. The government is encouraging people to be in debt and discouraging them from saving.
Did you happen to see WKRP in Cincinnati on WGN Sunday night? That was the quote of Bailey Quarters to Andy Travis when they were discussing axing non-paying advertisers!
Hate to burst all of the bubbles here –
but I heard the low rates are for new home buyers only.
I’m confused. We went through the Great Depression – courtesy of the Federal Government – in the ’30s. We went through the Savings and Loan debacle of the ’80s. Now we have experienced the wonder of The Great Democrat Financial Meltdown of 2008. And we know what caused all three.
Isn’t it fair to assume that these so-called geniuses of government, industry, and academia would have the ability to front some legitimate response, given the facts of history? After all, these were all self-inflicted disasters, caused or aggravated by government. Here’s a clue. Don’t do anything more than suspending any further government action and there is a high liklihood of success. Further government tampering will only prolong the trouble.
BTW, when can the American people expect investigations and prosecution of the Congressmen and Wall Street colluders who deliberately commited these crimes? Should be easy, the blood trail leads right to their doors. If they can get Fastow & Lay, these schmucks should be a piece of cake.
People are crazy if they wait for another .75%. Rates are at 5.25 now. Do you realize how much damage the Federal Government can do between now and then? The dollar is just as likely to collapse and you know what that brings. Never underestimate the incompetence of a bureaucrat, especially a Democrat.
can we attach some velcro to paulson and through him at the wall and see if he sticks? if he does, then we should have a cow chip throwing contest at him….
ooops throw his at a wall…
ooops throw him at a wall…geeze I can’t type today…
CRus,
I am not suggesting that the current policy of tax deductability for mortgage interest on a primary residence does not warp the housing market.
I am stating only that the immediate impact of eliminating the deduction at this time would have a very negative impact on the housing market and the value of housing. And that negative impact would ripple through the financial markets again.
If this were to happen now most people would not be able to afford to live in the houses they currently own. This would lead to higher rates of foreclosures and a huge surplus of realestate on the market. This would further depress housing values when they are already down. It would also depress the demand for new housing construction which would also lead to fewer new starts and higher unemployment.
Clue for Hank: you can’t prop up a market whose values were pumped up by giving loans to deadbeats who had neither the intention nor the ability to repay their loans themselves.
Just ask Arnold and others about basing the budget of the parasite class on those balloon values. (And herein is why Hank will fail: local government cost based upon fake real estate values = recession and worse.)
Yeah, it means I can pay off my mortgage with 2 of the new 100,000 dollar bills after the hyperinflation kicks in.
Sure you can. Just put on your ruby red slippers, sprinkle pixie dust and wish real hard, THIS HOUSE IS WORTH THAT MUCH, THIS HOUSE IS WORTH THAT MUCH, THIS HOUSE IS WORTH THAT MUCH.
Then the housing fairy will come along and make you debt go away…
This is actually somewhat else’s idea. This idea was formulated on the Mortgage Implode website. It is probably the first good idea Paulson has had through the bailout fiasco and here is why:
1. It is not a bailout of his Wall St buddies or any corporation. It is relief going directly to individuals.
2. It would probably create a floor for falling home prices. Until the bottom is reached, the chances of economic recovery are slim.
3. It would start getting people into houses. We need to “soak up” the excessive inventory to stabilize prices and neighborhoods.
4. It would create jobs. Yes, I admit I was in the mortgage industry, but a lot of good people lost their jobs. A purchase/refi boom could reinvigorate the industry.
4.5% is not that unreasonable of a rate. 4.75 to 4.875 was about the lowest rate in 2003-2004. Government intervention should not be the first line of defense, but this plan could definetely help.
Dory the fish from “Finding Nemo” makes the grandkids laugh, Colonel Klink from Treasury makes the grandparents cry.
Both.
So, let me get this right. The new idea floating around Paulson is to have govt strong arm Freddie and Fannie into offering subprime mortgage rates.
Uh, did I read that right? Hold it, isn’t that what got us into this mess in the first place?
Have we just entered the Twilight Zone?
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aElD2EJR0B2k
Apparently in America v.2.0 the political powers-that-be earnestly believe in trying to eliminate both failure and the consequences of failure via a massive pyramid scheme. But I hear the piper doesn’t take IOUs.
Much of what is being said on this site by Ms. Malkin and the commenter’s was said in 1929. This influenced Hoover and thus the extreme down turn in the market and the economy. Roosevelt worsened the situation with his indecision on gold and other efforts. The lesson learned was that when the market freezes up that the government must throw money at it as fast as they can print. I personally feel that we need to eliminate the mart to market accounting. This would help the banks to realistically value the properties.
Much of the crisis is the result of this accounting issue.
I agree that Hank Paulson’s new “plan of the day” nearly every day is the greatest destabilizer in the economy today. That he and his staff don’t recognize this obvious fact is one of the best arguments against government interference in the marketplace.
The man needs to shut up, sit down and fold his hands in his lap until his term expires. But, who could do that with $350 billion to give away?
That Congress didn’t see this coming when they gave him a $350 billion blank check is crazy. He is going to spend every penny he has regardless of how badly it damages the nation and the economy.
I totally agree and I don’t know why that haven’t addressed it.
They, GOP and Dems, haven’t addressed ANY solution that doesn’t involve greater government interference and control over the market. The only solution is more spending and more government.
They are not looking for solutions. They are looking to impose as much socialism as they can. Like Emanuel said, “never let a crisis go to waste!”
If they had never bailed out anyone we would be better off. Where is the fairness in deciding who is to be saved and who isn’t ? Is because my business is not a major corporation does it not deserve to be bailed out ? I am with MM
SUCK IT UP AND DEAL WITH FAILURE !
I am still looking for the clause in the Constitution that allows the federal government to buy shares in corporations.
I guess that is one of the problems with a “living, breathing document.”
That’s the plan, man! I think there are government officials who want the US to go under.
If Henry Paulson is Colonel Kink, then former governor Richardson is General Burkhalter…
I hate to sound like a conspiracy nut but how can the government ALWAYS do the wrong thing? Are they really so clueless as to be so WRONG every time or do they have a different agenda?
Some of both. Those who make it happen, those who let it happen, and everybody else who are left wandering what happened.
Surprising that you would watch a movie starring an outspokenly gay voice actress. Enough to know the words to one of her songs.
It hardly seems to fit in with your frequent tirades against all things homosexual, as you try to reshape the GOP
Fundamentally flawed and it lacks common sense.
Why? Because the 4.5% is for new loans. As far as I can tell, people are foreclosing on old loans. Moreover, this will cause a slow down in new home purchases. Who will go to closing knowing that in a month, or two, that they may get a lower rate?
So now, with this silly thought, we have foreclosures that are going to continue and new purchases that will be delayed. How stupefying? ARRGH!!
Someone please tell me what did Pres Bush see in Paulson to appoint him to this position? Why is Pres Bush allowing this guy to continue to speak?
I believe it is unfair to critisize without offering an alternative.
If the motive is to save the economy from total collapse, then do what was done successfully in the ’80’s. Establish, . . . excuse me, re-establish the Resolution Trust Company and have them buy these non-performing loans. Even if the RTC were to buy half of the bad paper and re-work them, have the Financial Institutions eat the other half, it would help. Don’t do anything that would involve buying stock in Financial Institutions (yes, too late), because that would only be of service to stockholders.
[NOTE: Buying stock involves brokers and they get paid. I wonder how much it cost us, in broker fess, to buy stock?]
Get the bad loans off the books of the financial institutions, first. And yes, this will eventually help the stockholders. But, they will have to hold onto their stock to realize future gain. What will that do? Re-establish confidence in the market and slow, or hopefully stop, crazed anxiety and selling from fear.
And, really . . . Pres Bush Please stop your appointee, Paulson, from talking. I mean, is he doing favors in the hopes of getting a job, with a financial institution, after you leave office?
Michelle has young kids like many of us. If you have young kids you know about Nemo and Dory. And, like me, I suspect Michelle doesn’t really make a point of discussing Ellen’s sexual preferences with her kids during cartoon movies. Think “age appropriate” if you can fathom such a concept.
Now, if Ellen made a cartoon movie about lesbian fish, I bet we would not be showing that movie to our kiddies…
To “straights” not everything revolves around sexuality. That is one of the main problems with the homosexual crowd.
I have to agree with WarEagle on this….not everything is about homosexuals…
Well, you will rarely go wrong when you agree with the WarEagle!
Well, except for stock tips and predicting the outcome of Auburn football games and stuff like that…
Grandpa Fred Thompson tells us a bedtime story oh please Grandpa let it have a happy ending SMILE.
http://www.dvorak.org/blog/?p=32754
I don’t think I have ever been so angry with our federal government. I own a real estate related business. About 2 weeks ago the mortgage rates dropped about a point overnight and the lenders and realtors were swamped. My friends in casualty insurance were buried with requests for new home owners policies and copies of current ones for lenders. My associates in banking and mortgage brokers were working 12 hour days up until Thanksgiving. The entire industry was excited and getting back on track. And then here comes Paulson.
I talked to bankers and mortgage brokers today who were swamped a week ago and some of them had fully half of there new loans put on hold today by customers after this announcement of perhaps lower rates. There were loan officers who told me that they did not have a single customer all day and the only calls they got were to put things on hold. Title insurance companies seeing the light at the end of the tunnel realized that they have to capitalize losses for at least another 2 months instead of one. I have an insurance agent friend who was doing upwards of 40 home owner’s policies or verifications a day since the rate drop and today did one.
The real estate market was surging. Just one smallish mortgage lender I am very familiar with was locking in over $1 Billion a DAY in new loans before Thanksgiving and today they were just as busy as the last few weeks with phone calls putting numerous of those locks on hold. They killed the market that was just coming back. *bangs head on wall*
It is one thing when the gov’t isn’t helping you or is even a surmountable irritation, but it is another when the gov’t is acting against the best interests of small business, the people and the nation. I think I have finally lost all faith in our government.
Of course the 4.5% interest rate won’t apply to people that have been paying their mortgage’s, like me…
Everything about Paulson is about him saving the people who already have his telephone number. Another crook like Reuben.