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Barack Obama Wants to Reward FBs


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2007 Aug 29, 2:57am   30,072 views  270 comments

by Randy H   ➕follow (0)   💰tip   ignore  

I don't follow politics for myriad reasons. I know that pretty much every Congressman and every Presidential hopeful is falling all over themselves to buy as many votes as they can -- business as usual. But I do know that the Obama crowd prides their candidate on his integrity and high ethical bar.

Well, Mr. Obama writes in Todays Financial Times "Comment" section:

Fine unscrupulous mortgage lenders

The implosion of the subprime lending industry is more than a temporary blip on our economic progress. It is a cancer that, given today's integrated financial markets, threatens to spread with devastating impact to housing and to our economy as a whole, unless we act to contain it.

Already I'm sure many of you will take some exception to Mr. Obama's statement. Myself, I don't see too much trouble with his concern; and I also think that the government has some role in providing stability to the core banking structure.

I'll go on, quoting the more objectionable excerpts. To Mr. Obama's credit, he does want to aggressively go after lenders who committed fraud, used deceptive tactics, or systematically exploited the elderly or minorities. To his detriment, not a single word was uttered about regulating or punishing the real-estate industry. I guess even a principled candidate has to be careful which lobbies he crosses.

This all started as a good idea -- helping people buy homes who previously could not afford to.

[...]

Today, as we weigh our options on how to best resolve this crisis, many argue that bailing out the borrowers and investors will just encourage them to engage in more of the same irresponsible practices.

[...]

The real victims in this crisis are the millions of borrowers who followed the rules, whose only crime was taking out mortgages lenders told them they could afford. Normally these borrowers could avoid foreclosure by refinancing their mortgages or selling their homes. The problem today is that they cannot refinance because no one will lend to them, and they cannot sell because the housing market has fallen. With some arguing that the effects of the worst subprime loans will not be felt until 2008 and 2009, this may be just the beginning.

We need to help struggling borrowers to weather this storm. One way to protect innocent homeowners -- at least until this crisis passes -- is to establish a fund to help people refinance or sell to avoid foreclosure.

[...]

That is why I have proposed a Home Score system that would create a simplified, standardised[sic] metric for home mortgages -- rather like the annual percentage rate (APR), the effective interest rate a borrower ends up paying on a loan -- allowing prospective home buyers easily to compare various mortgage products so they can find out whether they can afford to make the payments.

[...]

Owning a home represents a big part of the American dream and all Americans -- no matter what their income level -- should have the power to reach for that dream.

[...]

If we are serious about stopping this crisis [...] Washington needs to stop acting like an industry advocate and start acting like a public advocate.

I'll let you guys defend Barack or rip him apart. I'm not sure why Washington should necessarily advocate either side of the ownership/industry value chain, but I can see how this rhetoric gains populist votes.

One point for Mr. Obama: APR is not the same as EAR. You might want to get get someone on staff who actually knows something about markets, finance and economics before you go making a fool of yourself in the Financial Times.

--Randy H

#politics

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1   SP   2007 Aug 29, 3:08am  

Obama said:
they cannot sell because the housing market has fallen.

This is borderline retarded. Of course they _CAN_ sell. They just cannot sell for a profit. They gambled on a loan they couldn’t actually afford.

The government is not in the business of guaranteeing profit. Especially for gamblers.

SP

2   HARM   2007 Aug 29, 3:15am  

Very disappointing for any Democrats out there who saw Obama as the "anti-Hillary" (disclosure: I'm a former Democrat who went Independent in 1998). Perhaps his supporters could mount a letter-writing campaign to persuade the Senator to 'clarify' his position away from propping up house prices and towards substantive industry regulation.

3   Randy H   2007 Aug 29, 3:17am  

If we have any Obama supporters, please feel free to comment, especially if you're interested in defending or clarifying his commentary. You're welcome to state your case.

Warning, since this is political I need to remind folks that I delete all comments that include personal attacks or other overly broad generalizations lacking of any substantive arguments.

4   Randy H   2007 Aug 29, 3:20am  

...also feel free to describe any other candidates' position on this topic. I just ask that you provide a link or reference when you do, to prevent the obvious politico trollers. (hoping that this thread doesn't attract *that* crowd)

5   e   2007 Aug 29, 3:29am  

Paul/Kucinich 08!

6   DinOR   2007 Aug 29, 3:41am  

Going into the Labor Day weekend 2005 (height of the market) I was in the depths of depression. Had I been wrong all along? Would home prices simply continue to escalate even further?

(Labor Day 2006)

I'm feeling much better thank you, and for the first time in years it looked like my children would be able to afford a home with a reasonable down payment and monthly PITI!

(Labor Day 2007)

This is now a campaign issue!? This is now EVERYBODY'S problem? It's a "crisis"? You're kidding, right? This is just so many band-aids. I refuse to even discuss any kind of a "Home Score" program without reforming the REIC first! There won't be any "bad guys" to go after, the industry is so unregulated we don't know where these people ARE today!

Like SP says, they CAN sell (just not at a profit). Seems everyone these days has a stake in propping up rickety home prices?

7   Mo-Town   2007 Aug 29, 4:01am  

Call me a skeptic, but when I see politicians on either side of the aisle calling for a crackdown on "predatory lenders," it strikes me as little more than crass pandering. The law already permits buyers to go after "predatory lenders" through common law fraud or rescission, the Truth In Lending Act, and in California, the Unfair Business Practices Act. I've seen several articles discussing class actions brought against mortgage brokers under TILA, and I'm sure we'll see more in the future.

I suspect Obama is just posturing. Most presidential candidates sense that housing will be a big issue in this campaign, and they want to be on the "right" side of that issue. Once the election's over, I think we'll see most of these agressive campaign promises get toned down and replaced with some sort of token action. Still, I think it makes sense for any of us that oppose a government bailout to write Obama and other candidates to let them know how we feel.

8   SP   2007 Aug 29, 4:08am  

I REALLY SERIOUSLY think that we need to wildly exaggerate the link between subprime mortgages and terrorist funding, in order to make it more difficult for candidates to take any position that appears to benefit the subprime idiots - f.borrowers && f.lenders. While I do not generally like using the 't-word' (as a revised Godwin's law), that seems to be the only quick way to discredit these half-arsed or ill-motivated bailout schemes. Especially to get through to Joe & Jane Sixpack.

SP

9   Peter P   2007 Aug 29, 4:13am  

I cannot trust any president who calls himself a democrat.

10   StuckInBA   2007 Aug 29, 4:18am  

OK. Barack Obama is supporting a bail-out. What are the alternatives ? Which candidate has a sane position on this issue ?

11   SP   2007 Aug 29, 4:19am  

Mr. Obama said:
If we are serious about stopping this crisis […]

Crisis? What Crisis? This is no crisis, my dear chap. The spectacle that we are witnessing is actually a long-overdue END to the crisis. The entire edifice was overrun by vermin - and just as the process of decontamination has begun, you wake up and advocate that we "help" these vermin maintain their undeserved occupancy of the premises?

Washington needs to stop acting like an industry advocate and start acting like a public advocate.

Ah, so you too are a hopeful for the Orwell Award. Well played.

SP

12   Peter P   2007 Aug 29, 4:22am  

Ideally, we want someone like Sarko.

13   Peter P   2007 Aug 29, 4:25am  

Which candidate has a sane position on this issue ?

I wonder what Ron Paul has to say about that.

14   SP   2007 Aug 29, 4:30am  

I don't know who said this, but it was quite well put. (paraphrasing)

"Since the poor vastly outnumber the rich, and yet the rich wield vastly greater influence than the poor, it is essential for any politician to advocate a policy that promises to take from the rich and give to the poor - and implement the policy in such a way that it actually achieves the exact opposite. ... This stratagem has the effect of increasing the number of poor and strengthening the influence of the rich - so that the same approach can be used to even greater effect for the next election."

SP

15   HARM   2007 Aug 29, 4:30am  

I cannot trust any president who calls himself a democrat.

Both major parties are so corrupt, entrenched with special interest and ossified that, aside from Culture War issues, it's becoming hard to tell them apart.

16   Peter P   2007 Aug 29, 4:34am  

Sometimes, it really cracks me up when people say that the market has failed us. I agree that the market does not solve all problems, but this is why we still need military power.

In most cases, the market fails because we fail the market. We keep intervening for populist reasons and throwing the market out of whack.

The subprime crisis is a direct result of us tinkering with Free Market. We changed the risk-reward equations and we have created moral hazards.

Argh!

17   Peter P   2007 Aug 29, 4:36am  

SP, that is very true. If I become a politician one day, I will keep that in mind.

18   Peter P   2007 Aug 29, 4:37am  

Both major parties are so corrupt, entrenched with special interest and ossified that, aside from Culture War issues, it’s becoming hard to tell them apart.

Very true. I cannot trust any politician who calls himself a politician.

19   SFWoman   2007 Aug 29, 4:38am  

And speaking of Culture War issues, are these the people you DO trust, Peter P.?
http://tinyurl.com/2yqyks

I would love to see Ron Paul's take on this mortgage issue. It's probably one of the more sane.

Will Obama also bail out the poor women who were enticed to buy Hermes bags because salesgirls told them they could just charge it and they needed one to live the American Dream? What about people who charged big screen TVs and cars they couldn't afford? If someone was forced to buy a house with a gun to their head, or the few cases where mortgage brokers did insert other loan terms in the middle of documents then fine, help the people, but otherwise people will have to learn a lesson they should have learned at age three- there are consequences to your actions, not all of them what you'd like.

20   Peter P   2007 Aug 29, 4:44am  

And speaking of Culture War issues, are these the people you DO trust, Peter P.?

There should not be a Culture War. But such issues do not concern me, unless any party is going to promote vegetarianism.

You need a lot of trust from your Fugu chef, but probably less so from a "decider." :)

21   SFWoman   2007 Aug 29, 4:50am  

Unfortunately, they could use a few bad fugu chefs in Washington these days.

22   DinOR   2007 Aug 29, 5:08am  

"long-overdue END to the crisis"

Exactly! What is this? A "Save the Dodo" campaign? I've got to agree with "Mo-Town". We already have a multitude of regs. that deal with this issue. The real answer lies in just how flexible the lenders will (or can afford to be) in granting loan work-outs.

SeekingAlpha and CR are awash in commentary on why any form of bail-out only prolongs the agony or makes it even worse. We called this thing on the money. At what point is our credibility no longer in question?

23   GammaRaze   2007 Aug 29, 5:09am  

I can just hear the victims - "I make minimum wage and I only bought the million dollar house because my broker told me I could afford it."

"Never mind that I got greedy because everyone told me it would be worth $2 million in 5 years."

"Never mind that I knew I had other options like renting."

Many parties were at fault here - the government, the lending industry and the greedy speculators. However, politicians and media will spin it such that the former and latter were innocent and the only guilty people were the "predatory" lenders.

50 years from now, when kids study about the great housing bubble of 2000s, they will hear about the evil lenders, the victim homeowners and the savior government. And they will believe it. Why not? It worked for the great depression, didn't it? Everyone knows that it was all businesses' fault and the government stepped in and saved the country!

25   goober   2007 Aug 29, 5:50am  

I'm sure all of the candidates have the best polling data money can buy......BUT.......A bailout of the FBs (seems to me) would be political suicide.....wouldn't it????

As so many "economists" tell us these days:

"The housing problems are a tiny fraction of the overall picture and shouldn't affect most."

If that view is accurate.......a bailout might not go over well with the vast majority.....

26   Peter P   2007 Aug 29, 5:57am  

It worked for the great depression, didn’t it? Everyone knows that it was all businesses’ fault and the government stepped in and saved the country!

Actually, several evil men in Europe and Asia "saved" the economy. The New Deal was a bad deal.

27   skibum   2007 Aug 29, 6:11am  

I like how Obama's excerpt starts with:

This all started as a good idea — helping people buy homes who previously could not afford to.

i.e., the whole "let's increase the homeownership rate because it's a good thing (by any means necessary)" was a Bill Clinton legacy. Obama's not going to dis his own party while pandering to the crowds.

28   GammaRaze   2007 Aug 29, 6:14am  

Peter P, I was being sarcastic. I hope that was clear in my post. Maybe not.

29   Randy H   2007 Aug 29, 7:08am  

As for the New Deal, I don't like the historical accuracies anymore than the neorevisionism that's popular today.

The world was not a happy place in 1933. The New Deal was, at the minimum, a very important political tool that kept the country unified well enough to enable it to mount the war effort. In comparison to war-build spending, the New Deal spending was minuscule. Most people think far more money was spent on the New Deal than actually did because they confuse ND spending with war effort spending. An example is the "cost-plus" system which compensated manufactures churning out war machines. I always hear this called a "New Deal policy", when in fact it was entirely unrelated to (and not implemented by) the New Deal.

Sometime I think everyone analyzing Depression era economics forgets about the underlying world drivers at that moment in history. Economics may have been the fuel, but a colossal clash of ideologies which would decide how the world would be organized for the next century was the game.

30   HARM   2007 Aug 29, 7:09am  

Anyone see this gem (posted over at Ben's). Almost restores my faith in American journalism... almost. Pay close attention to the parts about Liz Seither and try to deduce the author's attitude towards her:

Down, but not out: "I'm not a real estate bum," Realtors say

31   Randy H   2007 Aug 29, 7:09am  

*inaccuracies*

32   Peter P   2007 Aug 29, 7:15am  

this little factoid seems to haunt just about every textbook explanation of the great depression. can you explain this statement further? no one else seems to be able to.

The War gave people a new focus. It created demand. It created employment. It set the stage for American supremacy in the 20th century.

33   Peter P   2007 Aug 29, 7:17am  

Economics may have been the fuel, but a colossal clash of ideologies which would decide how the world would be organized for the next century was the game.

And thanks to the invention of nuclear weapons, a deal was reached.

34   LowlySmartRenter   2007 Aug 29, 7:20am  

"all Americans — no matter what their income level — should have the power to reach for that dream."

This statement bothers me the most. First off, calling it a "dream" is perpetuating the image RE agents have been using for decades to play on the emotions of potential buyers. It's not a dream, it's just a house/condo/townhouse. Reminds me of car salesmen who refer to the vehicle as "sexy". A house is not a dream and a car is not sexy. They're just things.

Second, the notion that all Americans, no matter their income, should be able to buy a house is irresponsible. It denies the very real, very un-dreamy financial responsibility that comes with purchasing a house. It's the same kind of rhetoric that got us into this mess.

It doesn't surprise me Obama made that statement. His words have been consistently empty since he started his campaign. All his flowery talk makes me long for another 4 years of Bush bloopers. At least those make me laugh.

35   Peter P   2007 Aug 29, 7:26am  

His words have been consistently empty since he started his campaign.

I agree. No matter how hard he tries, he is not MLK. He should fire his speech-writer and hire David LeReah.

36   Peter P   2007 Aug 29, 7:27am  

im talking about the ‘bailers’ from asia and europe. who were they? when and how did it happen?

Who? Huh? The Original Axis of Evil.

37   Randy H   2007 Aug 29, 7:30am  

Peter

TOB == TOS == Troll

Subsequent Trolling will be yanked.

38   HelloKitty   2007 Aug 29, 7:30am  

Sounds like a REIC bailout more than a FB bailout.

Would the 'fund' make the lender whole on the short sale loss? That will popular on wall street. And fraud street.

I believe the reason the short sale is very difficult to get approved is due to lender has to agree to a real loss and the FB has tax consequence.

When these are removed you would see a MASSIVE abuse of the new federal short sale make whole system. Probably realtors/investors asking for short sales (and getting them!) for insane reductions.

The new mortgage rating system is just mumbo jumbo - non monetary so who cares.

39   Peter P   2007 Aug 29, 7:30am  

who were the ‘evil men’?

A. H.
B. M.
Emperor H.

40   HARM   2007 Aug 29, 7:47am  

Bernanke (politely) brushes off Senator 'Bailout please' Schumer with a "Dear Chuck" letter:

http://blogs.wsj.com/economics/2007/08/29/text-of-bernankes-letter-to-schumer/

The short version via the 'ol bullshit-filter:

"Yeah, those FBs and hedgies sure are in a pickle, huh? Must suck to be them...

Oh, wait, a lot of reckless, irresponsible subprime lenders 'n hedge funds are based in your state, aren't they? And a lot of your buddies are up for re-election next year, aren't they? Damn, it must sure suck to be you too!

Hey, maybe you bleeding hearts in Congress can turn the FHA into some kind of subprime borrower payment-reset refi squad or something... I mean, assuming the borrowers are like "creditworthy" 'n stuff (most obviously aren't). As long as it's off *my* plate, I could give a rat's patoot.

Oh, and btw, I'm *still* not lowering the FF rate or encouraging Fannie/Freddie to start buying more Alt-A toxic waste. But you have nice day anyway, m'kay?

Peace out,
Ben"
XOXOX"

I'm gaining more respect for old HeliBen day by day.

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