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March 15, 2008 – Comments (5)

Another one I owe to HousingPanic.

Bush Sez:

A root cause of the economic slowdown has been the downturn in the housing market. I believe the government can take sensible, focused action to help responsible homeowners weather this rough patch. But we must do so with clear purpose and great care, because government actions often have far-reaching and unintended consequences. If we were to pursue some of the sweeping government solutions that we hear about in Washington, we would make a complicated problem even worse — and end up hurting far more homeowners than we help.

For example, one proposal would give bankruptcy courts the authority to reduce mortgage debts by judicial decree. This would make it harder to afford a home in the future, because banks would charge higher interest rates to cover this risk.

So, he gets one right -- though only because his big-money buddies -- the types of guys who are getting their own bailout at Bear Stearns -- oppose this too. But we'll take this one, no matter how bad the intentions are. And then...

Some in Washington say the government should take action to artificially prop up home prices. It's important to understand that this would hurt millions of Americans. For example, many young couples trying to buy their first home have been priced out of the market because of inflated prices. The market now is in the process of correcting itself, and delaying that correction would only prolong the problem.

My Administration opposes these proposals. Instead, we are focused on helping a targeted group of homeowners — those who have made responsible buying decisions and could avoid foreclosure with a little help. We've taken three key steps to help these homeowners.

First, we launched a new program that gives the Federal Housing Administration greater flexibility to offer refinancing for struggling homeowners with otherwise good credit histories. Second, we helped bring together the Hope Now Alliance, which is streamlining the process for refinancing and modifying many mortgages. Third, the Federal Government is taking regulatory steps to make the housing market more transparent and fair in the long run.

OK, Hope Now is a joke, but that's fine. Those people didn't deserve a break anyway. FHA is a boondoggle, because it's a taxpayer drain -- its fees don't cover its costs, a that was before, when it guaranteed only good loans, not the zero-money down garbage that Bush and Congress are allowing in now.

Regulating mortgage loans... better -- there's a good idea. Way late, but good. But then, George screws up royal:

And now Congress must build on these efforts. Members need to pass legislation to reform Fannie Mae and Freddie Mac, modernize the Federal Housing Administration, and allow state housing agencies to issue tax-free bonds to help homeowners refinance their mortgages.

No, no, no. Fannie and Freddie are relics, and should be reformed by being made smaller, not bigger, as they've done. And this tax-free bond idea is rancid. It simply passes the tax-levy buck from the Feds to the States, who will punish everyone for the sins of the greedy home-flippers who are losing their shirts. I'm just glad there's not enough money around to make up for the bubble, so these efforts will quickly fail, underwater buyers with no equity will walk away, and foreclosures will need to be sold at 30-50 cents on the bubble buck, clearing the last of this ridiculous bubble, and letting the American economy move forward again, hopefully, with people much wiser.

5 Comments – Post Your Own

#1) On March 15, 2008 at 6:12 PM, devoish (97.30) wrote:

Third, the Federal Government is taking regulatory steps to make the housing market more transparent and fair in the long run

The 'devil is in the details' and all that. I expect any new regulations on top of the old regulations will intentionally serve to confuse the process more while shielding mortgage brokers behind another layer of 'see I followed the regulations" bs. Regulations that noone outside the industry will no how to interpret or where to look for them. I mean seriously, who is going to write these regs, Countrywide lawyers?

Here's an idea. Let Countrywide lawyers write the regs. Let them write mortgages based on those regs. Then give those mortgages to an 11th grade class for one hour. What the kids say it means, is what it means.. legally binding. No coaching for the test. Countrywide does not pick the classroom, the homeowner does, but the kids have to be passing.

See if that helps with "transparency".

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#2) On March 15, 2008 at 6:29 PM, abitare (72.47) wrote:

"Fannie Mae is a company that should not exist in the first place. The government has no business sponsoring corporations, promoting housing over rentals, or spewing nonsense about the ownership society. All of the above, in conjunction with the Fed bailing out banks in 2001 by slashing interest rates to 1% is what created the housing bubble.

Allowing Fannie Mae to take on larger loans is not the answer. Fannie Mae should be dissolved. Here is the irony of the situation: The government wants "affordable housing" but is doing everything under the sun to prop up home prices."

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

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#3) On March 16, 2008 at 12:38 AM, EScroogeJr (< 20) wrote:

"For example, many young couples trying to buy their first home have been priced out of the market because of inflated prices."

You mean Bush said that? Did the lose his flash memory chip or am I daydreaming?   

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#4) On March 16, 2008 at 8:54 AM, mickeyc21 (29.56) wrote:

There is no mystery about this huge about face. The gov has just worked out they CAN'T pay to keep property propped up. Not possible. Despite everyones idea that government is Daddy sometimes Daddy runs into tough times as well.

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#5) On March 16, 2008 at 2:01 PM, TMFBent (99.81) wrote:

I think you're right Maybe they did finally figure out that we can't print up the trillions in debt that enabled this entire thing-when big bunt's and the securitization pyramid scheme held the bag.

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