An August Surprise from Obama?

Reuters ^ | 8/5/2010 | James Pethokoukis

[Qbert]

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:

[SeattleBruce]

“Moron.”

??

Referring to ‘the one.’

[SeattleBruce]

I think it hits at the very least - 8 or 9000 from here, 860 on the SPX. This due to the continuing onslaught of poor economic data - at least the data we can uncover from the prevarications of the federal gubmint.

http://economicedge.blogspot.com/
http://www.marketoracle.co.uk/
http://www.shadowstats.com/

[Vicki]

I heard an interesting possible scenario on a local radio show this afternoon.

That this could bring a lawsuit by those who do not have a government backed loan. Why should one group be treated differently than another group of people? Isn't there equal protection under the law?

[Qbert]

“Referring to ‘the one.’”

Ok, good. :-)

“...What would this to the previously semi-free markets?”

I have no idea- I’m still trying to sort all this out. But like everything else with these Marxists, you know it’s going to lead to an economic doomsday for this country at some time. I think the moral hazards of this would be so overwhelming- why bother paying off student loans, or credit cards for that matter, if one is to assume that they will be next to be forgiven? And I’m not even so sure that forgiving the principal on the home loans would necessarily stop plunging home prices if the unemployment situation can’t turn around.

Each day we’re turning more into a Banana Republic. But thankfully, some people who didn’t get it before are starting to wake up- hopefully it’s not too late.

[ICCtheWay]

“ignorant masses” President Johnson called them “The Great Unwashed” ... Johnson failed in the end - but he knew politics, was powerful several times over, and the compliant people elected him to Senator and President... I am afraid he was correct in his assessment.

Thank God for my fellow Tea Party Patriots and all those associated...

[JouleZ]

We are watching Atlas Shrugged play out in real-time. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Sometimes I think this entire BO fiasco is really about eminent domain and taking property. That would explain the buy-out since the gov would then own a part of those properties.

[JouleZ]

We fought tooth and nail to get our home refinanced from 6.5% to 4.62% last year.
++++++++++++++++++++++++++++++++++++++++++++++

Sounds so familiar. We just went through that and when signing the papers I noted a “deed of trust” wordage instead of the term “mortgage”. I asked the difference and was told “it just makes it easier for the bank to re-posses your house within 90 days”.

In other words, a mortgage has to go through a court of law and can take a year or more so this verbage just helps the bank grab your property if you fall on hard times.

We cancelled the re-finance.

[CommieCutter]

I heard a report today where the weak economy was being blamed on clearance shoppers. (LOL)

They tell us we didn’t save enough; now they want us to spend.

Money is debt, debt is money.

I’m so confused.

[JouleZ]

Isn’t there equal protection under the law?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

According to a San Francisco judge, there is. Just ask any wannabe “married” gay. But wait, that doesn’t pertain to straight, Christian, tax-paying, home-owners I guess. I’m so confused./s

[Dark Fired Tobacco]

In addition to being a naked attempt to buy votes in November, this is also an indirect payoff to the banks again.

Will be interesting to see how they address home equity loans, second mortgages, delinquent loans, etc. There is also the problem of home prices drops being unevenly distributed nationwide; think Nevada (hi, Harry!), Florida, etc.

[RayChuang88]

That is NOT the way to solve the current economic crisis.

If Obama were to announce that we're going to have a MASSIVE overhaul of our income tax system with much lower marginal tax rates but very few deductions, he would go from a pariah to hero almost overnight, especially if the simplification includes ending taxes on bank account interest, capital gains and dividend payments. The stock market would promptly go through the roof.

[NoExpectations]

Reparations — yes. I read a Boston Globe sob story about an unmarried woman with 4 children and no job who purchased a $450K+ home. She was stunned that she had to give it up after she couldn’t make a single payment. I’d pay to see that loan documentation.

[SeattleBruce]

“They tell us we didn’t save enough; now they want us to spend.

Money is debt, debt is money.”

Right! Methinks ‘they’ are the problem!! We need Freedom’s Vision - accountable government - non-debt based money: http://economicedge.blogspot.com/2009/12/freedoms-vision-introduction.html

[varon]

I'm thinking of something portable, capable of being towed behind a pickup truck.

I was thinking of something automated, like what they use in the poultry business but I like your idea :-)

[Alas Babylon!]

I went to the link yesterday and read all the comments there. Very interesting. The Reuters readers think like FReepers!

However, the article is gone now. What happened? Did Rahm poke them in the shower, or did the journolist cabal show up?

[Qbert]

That is really odd- the article must’ve made a few heads explode in the WH. I didn’t even know it was pulled until I read your comment.

Here’s an update to the article:

http://blogs.reuters.com/james-pethokoukis/2010/08/05/obamas-august-housing-surprise-part-2/

[BnBlFlag]

Damn! I sure screwed up. I retired, built a new house in an upscale area in the Houston exurbs and paid cash for it. I shoulda financed it up to the hilt and got my bailout like all the other dumbasses. (I guess I’m even dumber than they are!)

[dools007]

Surely you jest. The Marxists own what passes for Wall Street analysis these days and they control the market’s ups and downs. If this happens, the market will break 12,000

[SlayerOfBunnies]

Lol exactly what liability is it you imagine you will zero out? If you are talking about the contra-account (something like allowance for bad debt), that’s all well and good - the balance sheet is already zeroed out and you will will charge an expense account when the loan is finally removed.

It’s not a good thing.

[marstegreg]

Here’s another one:

http://dailycaller.com/2010/08/05/an-august-surprise-from-obama/

I have seen about 5 independent sources so far.