Obama's Mortgage Bailout Plan

[August1991]

It is rare to see such a groundswell of reaction to something where the MSM goes one way (generally in favour) and the comments of ordinary people is so negative.

This policy was obviously not focus-grouped (or whatever the new verb is).

This video says it all but a quick glance at the comments after any news report will say the same thing. Obama's poll numbers are going to take a hit with this.

Here's the NYT article with the posted comments.

Edited February 19, 2009 by August1991

[Huston]

I love Rick Santelli.

As Obama's numbers, he already told people that if you do not like what he has done, don't vote for him next time.

Edited February 19, 2009 by Huston

[eyeball]

"...have people vote on the internet as a referendum..."

[Shady]

So far Barack Obama, and his economic team have been a complete disaster in terms of running the economy. They've inspired no confidence, and as a result, the market has tanked every week since his inauguration. And his mortgage bailout plan is more of the same. He wants to reward people for acting irresponsibly, while making those who act, and acted responsible, support the others.

So much for a new era of responsibility!

[punked]

So far Barack Obama, and his economic team have been a complete disaster in terms of running the economy. They've inspired no confidence, and as a result, the market has tanked every week since his inauguration. And his mortgage bailout plan is more of the same. He wants to reward people for acting irresponsibly, while making those who act, and acted responsible, support the others.

So much for a new era of responsibility!

I think you can't blame the guy who has been there for a month let's talk about the guy who didn't creat one job in 8 years, how about the guy who stimulated no capital in 8 years, and has caused the median income for the citizens of his Nation to go down. This is will be Bush's problem and if Obama can get it out the right wing can forget about the white house for a long long time.

[BubberMiley]

It's amazing that some are so ideologically deranged they would rather see the economy crumble than admit that the government could do something to prevent that from happening.

Edited February 19, 2009 by BubberMiley

[eyeball]

This is will be Bush's problem and if Obama can get it out the right wing can forget about the white house for a long long time.

I fear the opposite will probably be true if this recession becomes a depression. This could turn into the mother of all galvanizng events and the next election could be the last one anyone sees for... ever maybe.

[bush_cheney2004]

It is rare to see such a groundswell of reaction to something where the MSM goes one way (generally in favour) and the comments of ordinary people is so negative.

This policy was obviously not focus-grouped (or whatever the new verb is).....

They forgot to sooth the already frazzled demeanors of those still left standing and paying the freight for all the "great ideas". The backlash from callers on NPR was consistent.....no breaks for real estate speculators or deadbeats who bit off more house than they could ever afford.

Some of these people even give foreclosure and bankruptcy a bad name!

[Oleg Bach]

They forgot to sooth the already frazzled demeanors of those still left standing and paying the freight for all the "great ideas". The backlash from callers on NPR was consistent.....no breaks for real estate speculators or deadbeats who bit off more house than they could ever afford.

Some of these people even give foreclosure and bankruptcy a bad name!

North of Toronto there is great swell of wealthy asian immigrants - they live in million dollar monster homes. The kind that take at least two generations to pay off ----- wonder what will happen when they get too expensive to heat? Will they set up a little pile of chop sticks and set them alight...with a wok on top cooking up some beans from the food bank..it's not just the dead beats who bit off more house than they could afford - it's everybody...You should see these places....big ---- proud - they are really into the pride thing - Hope the Funshway brings in the bucks.....

[Huston]

It's amazing that some are so ideologically deranged they would rather see the economy crumble than admit that the government could do something to prevent that from happening.

Umm, the government caused this with their silly unsustainable ideas. They are the ideoloigcally deranged ones. They prevent the market to function in the first place with monoply money.

[August1991]

It's amazing that some are so ideologically deranged they would rather see the economy crumble than admit that the government could do something to prevent that from happening.

You're assuming that Obama is adopting the right policies - and that's not clearly evident. Even on the left, many are saying that the mortgage bailout is too weak and will be ineffective. It bails out the banks but doesn't reduce the principal of homeowners under water.

----

In any case, teh striking fact is how popular opinion is so strongly against this policy compared to the MSM chattering class that tepidly approves it. Without the Internet and comment boards, this difference would not be so obvious. A quick glance at the New York Times link in teh OP should be enough to convince anyone. The only people defending this policy are the hard left Obama-forever supporters.

I think one reason is that Fed policies, bank bailouts and TARP funds are simply too complicated for most ordinary people to understand. OTOH, everyone knows at least one person who has used their house as an ATM over the past few years with the expectation that rising house prices will protect them. Well, Obama's policy is going to bail those people out at the expense of the honest people who paid down their mortgage rather than refinance it. This is the kind of policy that people can grasp easily.

[Shady]

Umm, the government caused this with their silly unsustainable ideas. They are the ideoloigcally deranged ones. They prevent the market to function in the first place with monoply money.

Exactly. Government forcing banks to lend to people who otherwise wouldn't qualify isn't a free market, and wasn't a Bush Administration policy. In fact, they tried twice to change and regulate such corrupt policy, but Democrats blocked them at every turn, all under the guise of so-called affordable housing. Well, how's that affording everyone now?

This needs to be run on television every day, 365 days a year, so people never forget.

[msj]

Exactly. Government forcing banks to lend to people who otherwise wouldn't qualify isn't a free market, and wasn't a Bush Administration policy. In fact, they tried twice to change and regulate such corrupt policy, but Democrats blocked them at every turn, all under the guise of so-called affordable housing. Well, how's that affording everyone now?

This garbage again.

See link.

And this link.

Oh, and this one too.

[jdobbin]

Exactly. Government forcing banks to lend to people who otherwise wouldn't qualify isn't a free market, and wasn't a Bush Administration policy. In fact, they tried twice to change and regulate such corrupt policy, but Democrats blocked them at every turn, all under the guise of so-called affordable housing. Well, how's that affording everyone now?

This blame the Democrats completely for this mess is rich.

The banks got into trouble because they packaged and repackaged mortgages often made by mortgage brokers who operated under 50 states regulatory processes. In other words, standard underwriting practices went out out the window during Bush years and no one was forcing the banks to do this. In fact, they pursued this type of leveraged packaging. Moreover, the rating agencies were complicit in all this and their lack of regulation ensured that no one knew the risk involved in this type of leveraging.

Somehow the rabid Bush supporters have narrowed it down to a policy that Democrats put into place while ignoring the fact that the sub-prime idea originated with a too clever by half financial industry that Greenspan felt needed no regulation and that the Bush administration supported with lack of oversight.

[jdobbin]

Well, Obama's policy is going to bail those people out at the expense of the honest people who paid down their mortgage rather than refinance it. This is the kind of policy that people can grasp easily.

People are angry most certainly. They will most certainly be angrier if in the Republican led moral hazard that promotes increased foreclosures drives down home prices to rock bottom values for everyone.

It was Paulson's moral hazard philosophy that almost led to the collapse of the U.S. entire banking system when Lehman Bros went under.

I realize that hard right radical conservative view is a die out of industry is necessary and that suffering should be massive but is a Depression really necessary for change?

[bush_cheney2004]

...I realize that hard right radical conservative view is a die out of industry is necessary and that suffering should be massive but is a Depression really necessary for change?

Yes...how do you think we got to this juncture? I realize that the hard left radical liberals wish for massive expansion of the welfare state...is socialism really compatible with liberty?

[August1991]

This garbage again.

See link.

And this link.

Oh, and this one too.

Garbage? The final link above comes to the very useful conclusion that bankers were unethical. WTF?

In our view, poor risk controls, massive leverage, and the blind eye were really symptoms of a much worse disease: the root cause of the crisis was the gradual but ultimately complete collapse of ethical behavior across the financial industry.

That amounts to saying that bankers are greedy. Really? I suspect that bankers have been greedy for at least several centuries or more.

I found Phil Gramm's explanation more plausible, and it also blames the guy you love to hate: Alan Greenspan.

I believe that a strong case can be made that the financial crisis stemmed from a confluence of two factors. The first was the unintended consequences of a monetary policy, developed to combat inventory cycle recessions in the last half of the 20th century, that was not well suited to the speculative bubble recession of 2001. The second was the politicization of mortgage lending.

...

Community Reinvestment Act (CRA) requirements led regulators to foster looser underwriting and encouraged the making of more and more marginal loans. Looser underwriting standards spread beyond subprime to the whole housing market.

As Mr. Greenspan testified last October at a hearing of the House Committee on Oversight and Government Reform, "It's instructive to go back to the early stages of the subprime market, which has essentially emerged out of CRA." It was not just that CRA and federal housing policy pressured lenders to make risky loans -- but that they gave lenders the excuse and the regulatory cover.

Countrywide Financial Corp. cloaked itself in righteousness and silenced any troubled regulator by being the first mortgage lender to sign a HUD "Declaration of Fair Lending Principles and Practices." Given privileged status by Fannie Mae as a reward for "the most flexible underwriting criteria," it became the world's largest mortgage lender -- until it became the first major casualty of the financial crisis.

The 1992 Housing Bill set quotas or "targets" that Fannie and Freddie were to achieve in meeting the housing needs of low- and moderate-income Americans. In 1995 HUD raised the primary quota for low- and moderate-income housing loans from the 30% set by Congress in 1992 to 40% in 1996 and to 42% in 1997.

By the time the housing market collapsed, Fannie and Freddie faced three quotas. The first was for mortgages to individuals with below-average income, set at 56% of their overall mortgage holdings. The second targeted families with incomes at or below 60% of area median income, set at 27% of their holdings. The third targeted geographic areas deemed to be underserved, set at 35%.

The results? In 1994, 4.5% of the mortgage market was subprime and 31% of those subprime loans were securitized. By 2006, 20.1% of the entire mortgage market was subprime and 81% of those loans were securitized. The Congressional Budget Office now estimates that GSE losses will cost $240 billion in fiscal year 2009. If this crisis proves nothing else, it proves you cannot help people by lending them more money than they can pay back.

Link

Gramm even goes on to show that deregulation (such as it was) cannot be blamed:

The principal alternative to the politicization of mortgage lending and bad monetary policy as causes of the financial crisis is deregulation. How deregulation caused the crisis has never been specifically explained. Nevertheless, two laws are most often blamed: the Gramm-Leach-Bliley (GLB) Act of 1999 and the Commodity Futures Modernization Act of 2000.

GLB repealed part of the Great Depression era Glass-Steagall Act, and allowed banks, securities companies and insurance companies to affiliate under a Financial Services Holding Company. It seems clear that if GLB was the problem, the crisis would have been expected to have originated in Europe where they never had Glass-Steagall requirements to begin with. Also, the financial firms that failed in this crisis, like Lehman, were the least diversified and the ones that survived, like J.P. Morgan, were the most diversified.

----

IMHO, it is common after a bubble bursts for people to wake up and ask: "What were we thinking? Who is to blame for this?" In fact, irrational exuberance is a common feature of speculative markets. It is rational for an individual to buy more in a bull market.

The problem here is that assigning blame has become a partisan issue. If deregulation or greedy bankers are at fault, then we can blame the Republicans. If CRA is at fault, then we can blame the Democrats. If Alan Greenspan is at fault, then we can blame Ayn Rand Libertarianism.

Nobody really wants to know what went wrong. They want to be able to blame the other side.

For myself, I think Phil Gramm's article (while self-serving) makes sense. Unfortunately, it doesn't explain the real estate bubbles in the UK or Spain. It doesn't explain the financial meltdown in Iceland. So, I'd say the jury is still out.

[August1991]

People are angry most certainly. They will most certainly be angrier if in the Republican led moral hazard that promotes increased foreclosures drives down home prices to rock bottom values for everyone.

It was Paulson's moral hazard philosophy that almost led to the collapse of the U.S. entire banking system when Lehman Bros went under.

I realize that hard right radical conservative view is a die out of industry is necessary and that suffering should be massive but is a Depression really necessary for change?

People are throwing this phrase "moral hazard" around haphazardly.

Whatever solution is theoretically best, public policy takes place in a political context. This mortgage bailout package is going to offend about 90% of the US population who are renters or who have paid down their mortgages honestly.

When Obama is forced to change the provisions of this package (and I think he will have to), it's going to appear that he is solving the problem in ad hoc fashion.

Somebody in the White House should have seen this coming.

[jdobbin]

People are throwing this phrase "moral hazard" around haphazardly.

It was the Republicans who threw the phrase around. Paulson let Lehman Bros to go down based on that belief. It exploded in his face.

Whatever solution is theoretically best, public policy takes place in a political context. This mortgage bailout package is going to offend about 90% of the US population who are renters or who have paid down their mortgages honestly.

The drop on home prices will offend the population as well as the banks tightening credit even more as they run for cover.

When Obama is forced to change the provisions of this package (and I think he will have to), it's going to appear that he is solving the problem in ad hoc fashion.

What changes do you want? Many more foreclosures and more banks going down in flames?

Somebody in the White House should have seen this coming.

In the last administration.

[Shady]

In the last administration.

Say like in 2003?

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

...

Unfortunately, Democrats blocked said regulatory overhaul, and concluded the following:

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

And

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

The New York Times

So please stop lying jdobbin.

[jdobbin]

Say like in 2003?

So please stop lying jdobbin.

Stop lying Shady. Overall banking oversight was rendered useless by the Republicans.

And I have already shown you how the Republicans nixed the changes made by Democrats.

[Shady]

And I have already shown you how the Republicans nixed the changes made by Democrats.

You've done no such thing. You lied. I called you on it. And you lost.

[jdobbin]

You've done no such thing. You lied. I called you on it. And you lost.

I have quite a few times. You are the liar here.

It was the Bush administration that weakened oversight. They let bills they had control over die in committee as well in 2005 regarding housing.

http://iarnuocon.newsvine.com/_news/2008/1...subprime-crisis

It was the Gramm Leach Bliley Act that allowed banks to deal in mortgage-backed securities. Without passage of the GLBA by a Republican-controlled Congress, the subprime mess couldn't have happened. Chief architect of the GLBA? John McCain's economic adviser, Phil Gramm. Yes, that Phil Gramm. The GLBA was passed on a vote split along party lines (John McCain voted "aye," by the way).

So, suck it up. You lost. It was your Republicans who let this happen and are desperate to blame the Democrats 100% for it.

Edited February 20, 2009 by jdobbin

[Rue]

I am of the opinion we all know that too much or too little of anything including regulation can be a problem. The pendulum has swung back and forth and it will keep swinging.

All I will say is I would hate to end living in a state like China or Russia and I think we are bloody fortunate in Canada.

Edited February 20, 2009 by Rue

[Rue]

It's amazing that some are so ideologically deranged they would rather see the economy crumble than admit that the government could do something to prevent that from happening.

Lol. I get your point and agree but I think Libertarians and the disciples of Lyndon Larouche, Ron Paul and hey who knows Rue Paul, may no agree with you.

Edited February 20, 2009 by Rue