Obama's Newest $700 Billion Bank Bailout

Townhall.com ^ | August 28, 2011 | Mike Shedlock

[Kaslin]

President Obama is in Fantasyland or in some alternate universe. He wants to strengthen the housing market provided

• The plan helps a broad swath of homeowner

• The plan stimulates the economy
• The plan costs next to nothing

So says the New York Times in U.S. May Back Refinance Plan for Mortgages

The Obama administration is considering further actions to strengthen the housing market, but the bar is high: plans must help a broad swath of homeowners, stimulate the economy and cost next to nothing.

One proposal would allow millions of homeowners with government-backed mortgages to refinance them at today’s lower interest rates, about 4 percent, according to two people briefed on the administration’s discussions who asked not to be identified because they were not allowed to talk about the information.

A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere. But such a sweeping change could face opposition from the regulator who oversees Fannie Mae and Freddie Mac, and from investors in government-backed mortgage bonds.

Investors may suspect a plan is in the works. Fannie and Freddie mortgage bonds had been trading well above their face value because so few people were refinancing, keeping returns on the bonds high. But those bond prices dropped sharply this week.

Uninspiring Nonsense

Frank E. Nothaft, the chief economist at Freddie Mac, said the federal action could instill confidence.

"It almost seems to me you want to have some type of announcement or policy, program or something from the federal government that provides that clear signal that we are here supporting the housing market and this is indeed a good time to really consider buying," Mr. Nothaft said.

Quite frankly that is idiotic as one of my readers noted in an email. That government needs to step in and artificially support housing prices is not inspirational.

Moreover, two tax credits that blew up just proved it.

The idea that you can do something at no cost to fix the housing market is pure lunacy. I am not sure which of the following terms applies best

1. Holy Grail of Housing
   
2. Free Lunch
3. Perpetual Motion Device
4. Fountain of Youth
5. Pain with No Gain

I like number 1 best, but 1, 2, and 5 are solid choices.

The Keynesian clowns are of course very supportive of the general idea, led this time by Treasury Secretary Geithner and Christopher J. Mayer, an economist at the Columbia Business School.

Mayer says "This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing"

Mayer is obviously another believer in various free lunch ideas that cost nothing but will save housing.

Tom Lawler (on Calculated Risk's site) slammed some of these ideas back in July in Lawler: “Slam-Dunk” Stimulus? MS = Missing Something!!!!

The last few paragraphs of the article are rather interesting.

The government has already encouraged some refinancing through the Federal Housing Administration and through Fannie and Freddie, but participation is limited. For example, the Home Affordable Refinance Program excludes homeowners who owe more than 125 percent of the value of their house. To spur more refinancing, the government may decide to encourage Fannie and Freddie to lift such restrictions.

But government officials cautioned that Fannie and Freddie do not do the administration’s bidding, even though they are essentially owned by taxpayers.

A broader criticism of a refinancing expansion is that it would not do enough to address the two main drivers of foreclosures: homes worth less than their mortgages, and a sudden loss of income, like unemployment. American homeowners currently owe some $700 billion more than their homes are worth.

Got That?

Fannie and Freddie are owned by US taxpayers. The Obama administration wants to dump all of these proposals on the backs of taxpayers, perhaps without addressing the problem that "American homeowners currently owe some $700 billion more than their homes are worth."

Supposedly this can be done at "little to no cost".

Obama is either too dumb to see what's going on or he simply does not care what it costs to buy votes. I believe both.

Bank Bailout in Disguise

Depending on precisely how the proposal is implemented, the effect may be to take poor performing loans off the balance sheets of banks and hedge funds and dump the risks squarely on the backs of taxpayers via Fannie and Freddie.

It's no wonder Geithner supports it.

[GlockThe Vote]

Bfl.

[rlmorel]

"...plans must help a broad swath of homeowners, stimulate the economy and cost next to nothing...

Speechless. Just speechless.

[G Larry]

Yet another failed response in the Econ 101 Quiz!

If folks Refi their current mortgages what will they do with the “savings”?

1) The breakeven point for most refi’s is 12 months to recover all fees and points. SO THERE WON’T BE ANY “EXTRA CASH”!!!

2) Folks will pay off existing debt, accelarate principal payments, or PUT THE MONEY IN SAVINGS!

3) The reasons for NOT SPENDING remain the same! Obama policies and regulations are strangling productivity and job opportunity!!!!!!

[pieceofthepuzzle]

Using the ‘Three Little Pigs’ as an example, Obama is the guy from the government who comes in, takes as much as he can get away with legally from the industrious little pig who built a strong house of bricks, and then gives part of what he took to the two lazy little pigs who did nothing to earn it (AKA - Obama’s voting block).

[wita]

“It almost seems to me you want to have some type of announcement or policy, program or something from the federal government that provides that clear signal that we are here supporting the housing market

No thanks, we are still trying to recover from your last efforts, in behalf of affordable housing and you haven’t changed in the least.

[ken21]

the pubie party funds this.

meanwhile, the wsj the other day commended boehner for out witting obama.

[penelopesire]

Interesting....Obama’s plans have all bailed out Wall Street to the tune of trillions of dollars...yet we only have 1 billion in the FEMA coffers to handle the upcoming hurricane season and the other natural disasters from this spring.

WHERE IS ALL THE MONEY?

I think we all know the answer to that question.

[liberty or death]

These up front fees to be paid for this “Refi” go where? From what I could tell this is simply a way for socialists to raise some quick cash in their schemes to make their theory look profitable in the short term. And since their is no media oversight they get away with another sham.

[whitedog57]

This economist slammed the plan a while ago:

http://confoundedinterest.wordpress.com/2011/08/25/is-mass-refi-by-government-wise/

Amd here:

http://confoundedinterest.wordpress.com/2011/08/24/austrian-credit-bubbles-from-reagan-to-obama/

Mish is correct. This will be a disaster.

[mewzilla]

IIRC, Fannie and Freddie have PACs. Wonder if this is just a way to funnel money to them...

[Vaduz]

Berney Madoff chuckles with a thumbs up to Obama.

[BuddhaBrown]

If we attempt to analyze this in economic terms, then we are as poorly trained in politics as supporters of this plan would appear to be in markets.

This plan is NOT intended to help the economy. It is simply to shore up and build upon the already increasingly significant dependency and societal vengeance vote.

The people who like this plan want to re-like a floundering Obama. This will help. People who don’t like this plan, never did like Obama. Generally speaking.

It is one gigantically expensive, though free to Obama, campaign ad. That’s it, nothing more.

These people are NOT economically illiterate. They are morally corrupt.

[RobertClark]

Depending on precisely how the proposal is implemented, the effect may be to take poor performing loans off the balance sheets of banks and hedge funds and dump the risks squarely on the backs of taxpayers via Fannie and Freddie.

Who didn't see this coming? Uncle Warren calls Odumbo just before parking $5 billion in BOA. You see, he had to have some reassurance from the regime that he would make at least 20% on his money. The quickest way to reduce the need for capital and sure up BOA is to remove the hundreds of billions in underperforming loans from their books.

[LomanBill]

Supposedly this can be done at "little to no cost".

 

 

Bullsyhte.   It's cost us plenty so far:

 

"Oops, Wall Street got Drunk"

 

 

Follow the....

http://www.campaignmoney.com/finance.asp?type=in&cycle=08&criteria=pritzker&fname=penny

 

Billionaire business mogul Penny Pritzker is a member of one of America’s richest families and was the Finance Chair for the presidential campaign of Barack Obama.  It was Pritzker that led the prolific, and illegal, fundraising that helped power Barack Obama’s presidential campaign.  She was the chair of Chicago-based Superior Bank’s board for five years.  Pritzker was into subprime lending before it became all the rage starting in around 2000.  Prtizker's chairmanship was to concentrate on sub prime lending, principally on home mortgages, but for a while in subprime auto lending, too, after the Pritzkers' bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992. Back then they called it "predatory lending." Superior Bank went belly up in 2001 with over $1 billion in insured and uninsured deposits; 1,406 depositors lost much of their life savings.  This collapse came amid harsh criticism of how Superior’s owners promoted sub-prime home mortgages. On Nov. 1 [2002] the Federal Deposit Insurance Corp. pointed the finger at Ernst & Young, Superior’s auditor, in a fraud suit filed in federal court here.  But that action came two months after a group of Superior depositors accused the bank’s owners and directors, including two members of the Pritzker family, of racketeering....

[snip]

...Pritzker is chairman of Classic Residence by Hyatt, luxury senior living communities in 11 states; chairman of The Parking Spot, which owns and operates off-airport parking facilities in nine cities; chairman of the credit data company TransUnion and chairman of Pritzker Realty.  She also sits on the board of Global Hyatt and plays a role in numerous non-profit groups, including serving as chairman of the Olympic village portion of Chicago’s bid to win the 2016 Summer Games. 

 

http://www.theobamafile.com/_associates/PennyPritzker.htm

 

" Uhhhh, that's not ours either! "

---Weiner, Perry, Bush, Obama, Pelosi, Frank, Pritzker and Associates, LLLP.

 

Got Tea?

 

 

 

[JudgemAll]

None of these people have their mind right in DC.

From Bill Clinton who said “stroke of the pen, kind of cool” in making executive orders, now we have Zero, “stroke of the knock on finance, kindacool”, spare me a few 100s more.