April 12, 2008

Editorial: "Congress should just say no to housing bailout express"

Special post - here's the column, in its entirety. Note that The Heritage Foundation is one of the most prominent conservative think tanks in the world, the hero of the GOP and Fox News. And any Republican who supports a housing gambler bailout (like McCain) is going to be in a spot of trouble with the conservative base.


Bailouts, subsidies and slush funds: Such are the main ingredients of the housing bill now stewing in Congress.

Bailouts to borrowers, many of whom bought homes at ridiculous prices hoping to flip them before the party ended. Tax credit subsidies to supplement the down payments of buyers looking for a steal on a foreclosed home. And a little slush fund for state and local governments to reward their favorite local builder or bank by taking empty properties off their hands at above-market prices.

And that’s the good news. Why good? Because Congress would only temporarily reward bad behavior and waste a few more billions. Policies like these, while infuriating, at least have no major long-term consequences. The really bad news is Congress is also trying to stick the Federal Housing Administration’s nose into private markets in a major way.

This could disrupt the processes already at work to resolve the housing crisis and, worse, expose taxpayers to hundreds of billions in losses. What’s going on here? Borrowers by the millions are falling behind on their mortgages. The problems are most severe in a few states. Some, such as Nevada, California and Florida, enjoyed a huge, multi-year speculative bubble that’s now popped in spectacular fashion. Others, such as Ohio and Michigan, are seeing home prices decline because of more fundamental weaknesses in their economies, in some cases significantly exacerbated by extraordinarily foolish state fiscal policies. Yet just about every state is experiencing a housing problem: unusual numbers of borrowers who are delinquent or soon will be, home prices falling a little or a lot, and contraction in construction.

Fortunately, the mortgage industry isn’t waiting for Congress to get its act together. Spurred on by the Treasury Department through a program called Hope Now, the industry - supported by services, counselors and community non-profit organizations - is actively seeking creditworthy borrowers who are or are likely to get into financial trouble. Why? To find a way to rework the mortgage or the payment schedule so the borrower can stay in the home.

Since last summer, the industry has successfully reworked more than a million mortgages, and is reworking hundreds of thousands more every month.

Congress wants to inject the FHA into this process. The FHA would guarantee these reworked mortgages, meaning that if they get into trouble again, the FHA (read: taxpayers) will be on the hook for any losses. In fairness, the FHA is better equipped today to assume these new risks and responsibilities. Only a few years ago, the agency was on the precipice of extinction, having seen its market share dwindle to almost nothing.

Recognizing its fate, the FHA went on a crash modernization program - just in time, if Congress carries out its threat. But neither FHA improvements nor market troubles justify Congress putting taxpayers on the hook for future losses from past bad behaviors.

And who pays for this bailout? Not ‘‘the government.’’ It’s all the responsible homeowners and renters who resisted the temptations of the housing boom, refused taking out a home equity loan to fund a vacation or new car, declined to buy a home with no down payment, ignored the low teaser rates dangled by shyster brokers. Meanwhile, the homeowners who yielded to temptation are offered an escape hatch. Who pays? In short, you pay - unless you’re getting a bailout.

Where does the bailout business stop? Simple. It stops at the beginning - by saying no to bailouts, subsidies and slush funds.




Yoski said...

"Tax credit subsidies to supplement the down payments of buyers looking for a steal on a foreclosed home. "
Wrong! The tax credit is for those buying a foreclosed home at foreclosure auctions, ie. the note holder. That means 99% of those tax credits will go to lenders. This in turn will give them added incentive to foreclose. The more foreclosures the more downward pressure on prices, etc. So this is actually adding fuel to the fire at tax payer expense. Nice job! But what do you expect from our corrupt and clueless politicians?

eric in vegas said...

The losers are not tax payers, it's ANYONE holding American dollars.

Yoski said...

"The losers are not tax payers, it's ANYONE holding American dollars."
The tax payer will definitely take it on the chin. Wait till they raise all kinds of taxes next year.

Rom said...

So I actually wrote to my representatives AGAIN.

How about you?

Bitterrenter said...

Who are you kidding? Conservatives only oppose government intervention when it's not THEM that needs the help. When THEY need help they turn into instant socialists and are the first in line for the handouts. Like pigs at the trough, they take their share and try to make off with everyone else's.

And we know it's mostly republican voters who bought into this housing bubble, overextending themselves to keep up with the Joneses. For them it's all about owning, having more more more mine mine mine. Must have the big SUV, must have the boat, the toys, the McMansion, the appearance of wealth. Why, it's their hero's "Ownership Society" in action!

But I did get a kick out of your naive belief that conservatives who got their tits in the housing wringer are going to oppose a republican offering them help. Those filthy savages will do anything for a buck. They'd eat their mothers if they thought they'd shit money.

mtndjd said...

Here's my letter to Congressman McCarthy in California;

Dear Mr McCarthy, please vote against the use of any tax payer funds to bail out irresponsible real estate speculators and folks that never had the means to "buy" a house. It should not be at the cost of the responsible tax payer, who saved, and while paying taxes was able to buy their own little humble place that they could 'afford', while many irresponsible people lived in luxury in a home that was not affordable. This tax season is especially hard for me because I feel like I may be paying my hard earned money to the government that will in turn be paid directly to those that have no right to it.

Thank You

I hope that everyone who reads this (and agrees) uses the links that Keith has provided to do the same.

Keyser Soze said...

I'm not sure which prison to write Rep. Renzi.

Anonymous said...

Here is my letter to Representative Jane Harman from California:

I am a renter in Redondo Beach, CA. I rent because when I moved to this area in 2003, Los Angeles housing prices had hit the peak in terms lack of affordability based on historical patterns. I thought I would wait until the pattern reversed as it always had throughout recorded history. Wow, was I surprised when housing, already at its peak, doubled, and doubled again.

This bubble was a demoralizing experience to live through year after year. I could never work enough or save enough to even begin to keep pace with the appreciation in housing from 2003 - 2007. There is absolutely no quality of life while one is working so hard and falling so far behind.

I have become a self taught expert on economic bubbles and am very aware that this was purposely caused by human greed (despite the portrayal among politicians and the main stream media that the bubble is some sort of accident or act of god).

At this point, various bailout schemes to use my tax dollars are being proposed to keep underwater debtors in their mortgages (not "homeowners").

And what is the "tragedy" that we must use our tax dollars to save these debtors from??? RENTING! As a renter, I find it morally repulsive that I must use my taxes to save the greedy and ignorant from the horror of living my fate.

Renting until one can reasonably/safely purchase a home is not a tragedy. The tragedy is the bubble itself.

Here is a quick primer on how to avoid these financial catastrophes. To be effective, any government intervention to deal with the results of this bubble or prevent the next bubble must address this root cause:

Humans are greedy and will try to gain at the expense of others even to the peril of the whole of society. Government must protect society from the greedy by preventing the violation of "natural laws of economics." In the case of the current housing/credit bubble, these "natural laws," have been violated:

1. Humans can afford to PAY BACK a mortgage around 2.5 x annual household income.

2. Usury is evil.

3. Healthy economy = supply + demand (For REAL, SUSTAINABLE economic growth, supply AND demand must be nurtured and cultivated. Supply side economics is a mean spirited joke.).

help screw suzanne said...

-Begin Urgent Public Service Message-

Attention ALL Potential Homebuyers that absolutely must purchase a home and cannot wait for the 50% off sales next year:

1. Find the house you want using web resources.

2. Do not contact any real estate agents regarding the property.

3. Contact the owners directly and have them show you the property. If the home meets your needs, urge the owners to dump their real estate agent and lower the price by the sales commission amount.

-Return to Housing Crash Programming-

Anonymous said...

Well said, Bitterrenter!

The only difference between Repubs & Dems is that the Repubs don't want to pay for their government aid. They would rather borrow the money from the Chinese and let their grandkids pay the bill.

Or maybe they think that God is going to "rapture" them out of the mess they've put us in.

mairca izda debol said...

Yet you still support Obama and his massive bailout plan for bankers, flippers, fraudsters, realtors, brokers and every piece of REIC scum in the world.

Reality said...


Guess you didn't read the Heritage Foundation editorial that Keith brought us. The last time I checked, the Heritage Foundation was still very pro-Republican.

Anyhow, the Democrats are far more interested in a REIC bailout because Democrats are owned by the bankers (Hilary, Schumer, Dodd, Corzine, etc. etc.) When bankers do not run for offices like Schumer and Corzine do, they support Democrats (e.g. Rubin, Weil, Dimond, etc. etc.) REIC bailout is not about bailing out homedebtors, but about bailing out banks. The old saying is that, when you owe the bank a little money and can't pay up, it's your problem; but when you owe the bank a lot of money and still can't pay up, it's the bank's problem. That's why Hilary, Dodd and Schumer are out pushing for bailing out their banking buddies . . . of course dressed up as bailing out the little guys.

As for big SUV's, both Rebs and Dems like those; even the big foot-print Al Gore uses one to cart his own family around. The fiscal conservatives just tend to borrow less in getting one.

Refuse to buy overpriced said...

Thanks for putting up a link to the online petition.

If every Bubble blog had a permanent, prominently displayed link like patrick.net, I think we could get alot more. Polls show the majority of Americans are against the bailout.

shweeet said...

Rail all you want HPers, this bailout cake is already in the oven. Did you dumb shits really think Congress, the administration, and the Fed would stand by while the pillars of power tilted and fell?

The G7 meeting sealed the fate of anyone foolish enough to fight the Fed and bet on a financial meltdown. Here is what we'll see in coming weeks:

1) The UDX will stabilize at ~70
2) The Fed's bailout fund will be increased from $800B to $5T
3) Central banks will wage war on gold
4) Market intervention (ala PPT) will be legalized by Congress
5) Debts will be nationalized, RE first, then others

The net effect will be inflationary, yes, but when has that ever stopped a good politician? Face it, you all are DOPES!!

Dow 17K by year end.

Anonymous said...

you guys are so cute thinking your letters to congress and online petitions matter. hey i know maybe if you put a tooth under your pillow the tooth fairly will leave a dollar. about as much chance of that happening as your letters being read.