Posted: Wed Jul 23, 2008 8:22 am Post subject: Bush drops opposition; endorses housing bailout
Well, it looks as if Joe Q. Taxpayer will be on the hook for speculators - the housing kind, that is - after all.
Ugh.
Quote:
Bush Endorses Housing Bailout
Posted by John Carney, Jul 23, 2008, 9:03am
President George Bush announced this morning that he was giving up his opposition to the housing bailout bill. Over night news emerged that House and Senate leaders had reached compromise deal that would extend protections Fannie Mae and Freddie Mac and provide up to $300 billion to insure refinanced mortgages.
The president had said he would veto the bill on the grounds that it would "unfairly benefit lenders who made bad loans." It had been tainted by news that its most prominent supporter, senate banking committee chairman Chris Dodd, received massive campaign donations from Bank of America executives and sweetheart loans from Countrywide. A memorandum emerged indicating that the bill may in fact have been written around the requests of Bank of America.
...
Posted: Wed Jul 23, 2008 8:27 am Post subject: Re: Bush drops opposition; endorses housing bailout
And if DealBreaker isn't your news outlet of choice, here's one from the AP, via Yahoo:
Quote:
AP
Bush drops opposition to housing bill
Wednesday July 23, 10:19 am ET
By Julie Hirschfeld Davis, Associated Press Writer
Bush drops opposition to Democratic-sponsored housing bill hours before expected House vote
WASHINGTON (AP) -- President Bush dropped his opposition Wednesday to legislation aiming to calm the chaotic housing market despite his objections to a $3.9 billion provision. The House was expected to vote on the bill Wednesday, and it could become law as early as this week.
Under the bill, the government would help struggling homeowners get new, cheaper loans and would be allowed to offer troubled mortgage giants Fannie Mae and Freddie Mac a cash infusion.
The Bush administration and lawmakers in both parties teamed to negotiate the measure, which pairs Democrats' top priorities -- federal help for homeowners facing foreclosure and $3.9 billion for neighborhoods hit hardest by the housing crisis -- with Republicans' goal of reining in mortgage giants Fannie Mae and Freddie Mac while reassuring financial markets of their stability.
...
_________________ "It's called the American Dream because you'd have to be asleep to believe it."
Posted: Wed Jul 23, 2008 8:30 am Post subject: Re: Bush drops opposition; endorses housing bailout
And some more bile...
Quote:
The bill would let hundreds of thousands of homeowners trapped in mortgages they can't afford on homes that have plummeted in value escape foreclosure by refinancing into more affordable, fixed-rate loans backed by the Federal Housing Administration. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.
The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the FHA.
It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time home buyers for people who bought homes between April 9, 2008, and July 1, 2009. It also allows people who don't itemize their taxes to claim a $500-$1,000 deduction on their 2008 property taxes. That chiefly benefits homeowners who have paid off their homes and can't claim a deduction for mortgage interest.
_________________ "It's called the American Dream because you'd have to be asleep to believe it."
Joined: Jul 02, 2008 Posts: 362 Location: Espinho, Porto, Portugal
Posted: Wed Jul 23, 2008 8:38 am Post subject: Re: Bush drops opposition; endorses housing bailout
I'm guessing this follows practice: when a borrower can't pay, it's been the rule to find ways to help him so, even going as far as forgiving debts (that happens mostly between nations, though). Standard practice. What was the logic behind bailing Fannie, Freddie and the other banks while letting people sink? If the state exists to collect taxes, help big financial corporations and forget about people, what's the point of having a state? _________________ Give anyone a lever long enough and they can change the world. It's unreliable levers that are the problem.
Posted: Wed Jul 23, 2008 8:44 am Post subject: Re: Bush drops opposition; endorses housing bailout
There's a little something for everyone in that bill, it seems, except for renters: tax credits for first-time homebuyers, property tax credits, artificially affordable mortgages sanctioned by the government, and they even found a few billion to keep the gentrifying ghetto from returning to its roots.
What's not to like? _________________ "It's called the American Dream because you'd have to be asleep to believe it."
Joined: Jul 02, 2008 Posts: 362 Location: Espinho, Porto, Portugal
Posted: Wed Jul 23, 2008 8:52 am Post subject: Re: Bush drops opposition; endorses housing bailout
emersonbiggins wrote:
What's not to like?
Two things, really: the fact that this will lead, in time, to the re-inflation of the bubble, because none of the players was punished, and therefore most will come out better then they were when the bubble burst; and the fact that renters are, again, forgotten. That's The Ownership Society, again. _________________ Give anyone a lever long enough and they can change the world. It's unreliable levers that are the problem.
Posted: Wed Jul 23, 2008 8:57 am Post subject: Re: Bush drops opposition; endorses housing bailout
I agree; the concept of Moral Hazard might as well have been written in Latin, never to have been translated, for all those involved in this racket. _________________ "It's called the American Dream because you'd have to be asleep to believe it."
Posted: Wed Jul 23, 2008 10:32 am Post subject: Re: Bush drops opposition; endorses housing bailout
emerson,
i'm finding it difficult to decide what to think about the current string of bailouts in the credit market. i definitely agree that it was the distortion of moral hazard that got us where we are, but i am also persuaded by the idea that letting these agencies fail, at this time, so far beyond the point when that moral hazard should have kicked in, might have such far reaching, immediate, and chaotic consequences, that this option is the only one available.
it seems like the goal of these bailouts, as they may fairly be described (though the treasury is calling them reassurances), is to prevent an undue swing of that Moral Hazard barometer in the other direction, where credit supply drops off to nothing overnight.
one talking head on NPR this morning advocated letting the share prices of these agencies fall to zero, temporarily nationalize them, then let them go as private agencies on a reduced scale.
what do you think the consequences of letting these two agencies die would be, now after the damage has been done?
i am personally becoming more convinced that any policy directed at "making homes more affordable for the middle class, common man, etc." through sponsored financing is a mistake, because if you make it possible for more people to own homes, demand spikes, housing prices increase, and you are just back where you started... oh yeah, except now you have more people servicing more debt...great. And of course, people reselling houses make a profit on the delta. But it's a basic, you can't get something for nothing problem. since the financing inputs no productivity, the economic equivalent to the second law of thermodynamics kicks in.
Posted: Wed Jul 23, 2008 10:43 am Post subject: Re: Bush drops opposition; endorses housing bailout
Aflurry - though this won't answer any of your questions in a direct sense, I have a notion that we are in for, at least in terms of the housing market, a reversion to the pre-WW2 mean, where short-term, high-interest loans with balloon payments were the norm. I do not think we will return to the pre-boom years of 8-10% mortgages for decades on end, simply because there is a justification of endemic risk aversion at this point, and this is compounded by resource constraints on a global scale.
Add to this the end of the unparalleled stability of the postwar years of the U.S. to underwrite the middle class (via the implicit backing of the housing market, and subsequent risk repricing by the private market), and you can clearly see the golden age of America having come to an abrupt end. _________________ "It's called the American Dream because you'd have to be asleep to believe it."
Joined: Jul 02, 2008 Posts: 362 Location: Espinho, Porto, Portugal
Posted: Wed Jul 23, 2008 10:46 am Post subject: Re: Bush drops opposition; endorses housing bailout
Interesting position: is it possible that it will re-inflate the bubble? I don't think such a thing has been tried. They've tried new bubbles, but not fixing a blown one. Hmmm.
Also, flippers may be back in action next week. More trouble, really. _________________ Give anyone a lever long enough and they can change the world. It's unreliable levers that are the problem.
Posted: Wed Jul 23, 2008 11:07 am Post subject: Re: Bush drops opposition; endorses housing bailout
I'd be really surprised if anything we do now would re-inflate the housing bubble. Ands even as the housing bubble was inflating, I caught myself wondering what on earth the next bubble could even be.
I kind of feel like we've seen an equity bubble and a credit bubble. There's only one more form of financing left to inflate - cash.
To emerson's last comment, if allowing the mortgage agencies to fail really means politically acknowledging the end of America's golden age, how can we possibly even lift an eyebrow at what they are doing? of course they are going to try to do something to put the brakes on that, even if it is completely ineffectual.
In a myopic view, there's nothing really wrong with housing prices dropping to "the preWW2 mean" (though, from the famous Schiller chart, it looks to me like the era between the wars was below the mean - how do you identify this as the mean point?). Certainly this favors people who can buy the house over those who can buy the mortgage. But the credit market is global, and all forms of credit bleed together. I'm more worried about credit of all kinds drying up in a sudden way.
(On an unrelated note - the version of the chart i liked to above has the building cost index plotted as well. Can anyone shed some light on why that creeps up consistently over the century? I would have thought the opposite would be true, what with all the Caterpillars, etc. Is it labor costs? Building codes? House size?)
Posted: Wed Jul 23, 2008 11:12 am Post subject: Re: Bush drops opposition; endorses housing bailout
CarlosFerreira wrote:
I'm guessing this follows practice: when a borrower can't pay, it's been the rule to find ways to help him so, even going as far as forgiving debts (that happens mostly between nations, though). Standard practice. What was the logic behind bailing Fannie, Freddie and the other banks while letting people sink? If the state exists to collect taxes, help big financial corporations and forget about people, what's the point of having a state?
To benefit the corporations in general, of course, and the financial corporations in particular, of course.
All I can say to all of the fake conservatives and liberals out there who have, their entire lives, voted for bigger government . . .
You're about to get your bigger government - I just don't think you're going to be happy about the method of delivery. _________________ Massive Human Dieoff must occur as a result of Peak Oil. Many more than half will die. It will occur everywhere, including where you live. If you fail to recognize this, then your odds of living move toward the "going to die" group.
Posted: Wed Jul 23, 2008 11:25 am Post subject: Re: Bush drops opposition; endorses housing bailout
Instead of subsidizing $1 million condos in Hayward, why can't your government subsidize something valuable, like ice cream? _________________ People first, then things, then dollars.
There will be enslavement & cannibalism.
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