This spring Obama promised us no more bailouts. However, as the “summer of recovery” has turned into the summer of prolonged misery, Obama is considering another massive bailout, stimulus or as I like to call it, a redistribution. Furthermore, team Obama has found it’s way around the bailout fatigue of Congress. Funneling taxpayer money to Fannie and Freddie, Obama can bailout mortgages to tune of about $800 billion.
All of this, without going to Congress!
This may sound like a lifeline to many of us who owe more than our houses are worth. How generous of the government to bail us out. However, consider it is the taxpayer who is actually putting up this money. Then consider who is actually holding these toxic mortgages that were pumped into the market by Fannie and Freddie. These are foreign banks and investors. They are the ones that will benefit from this “main street” bailout.
While those who paid too much for their homes are indeed in a bad situation, what about those who took out small business loans or car loans and are now in financial straits? There is no bailout for these bad investments. When investments fail, is it the government’s job to pick and choose who it saves?
A “free” market controlled by the government to this extent is not capitalism. Those with political capital are favored over the average taxpayer. When will this perpetual bailout of the politically chosen end?
An August Surprise from Obama?
By James Pethokoukis
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.
Read More – http://blogs.reuters.com/james-pethokoukis/2010/08/05/an-august-surprise-from-obama/
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