Rhymes With "Male Lout"

Be very afraid of some of the "solutions" being proferred to the subprime-triggered credit crunch:

The Fed, the Bank of England and the European Central Bank are exploring the feasibility of using taxpayers' money to shore up the mortgage-backed securities market, the Financial Times reported on March 22 [...]

The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans, said Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. While purchasing some of the $6 trillion mortgage securities outstanding would take problem debt off the balance sheets of banks and alleviate the cause of the credit crunch, it would put taxpayers at risk.

Ya think? Meanwhile, the Washington Post today asked each major presidential campaign their big ideas for Solving the Economy. Some excerpts:

Barack Obama's Austan Goolsbe:

Obama supports efforts to create a new FHA Housing Security Program to provide significant incentives and guarantees for lenders to buy out mortgages that exceed the value of homes and convert them into stable 30-year fixed-rate mortgages that homeowners can afford. This is a responsible plan designed to help responsible homeowners without rewarding borrowers or investors who helped create the problem by gambling recklessly or committing fraud, and it asks both sides to contribute to the solution.

Obama would couple this plan with a direct interest-rate subsidy for low- and middle-income borrowers patterned on the mortgage interest deduction now predominantly used by high-income itemizers, as well as with comprehensive credit counseling, additional aid for loan workouts and reform of the bankruptcy code.

John McCain's Douglas Holtz-Eakin:

McCain will not play election-year politics with the mortgage crisis. In evaluating any proposal, he will apply four principles: (1) No taxpayer dollars should bail out real estate speculators or financial market participants who failed to do due diligence in assessing credit risks. (2) Any financial assistance should be accompanied by reforms that ensure that we never face this problem again. (3) Too little equity -- small down payments by home buyers and too little capital at our financial institutions -- was a source of the housing and credit problem that must be reversed. (4) Where government assistance is merited, lenders and homeowners should make financial sacrifices to qualify.

The financial markets are suffering the after-effects of the bursting of a housing bubble. As with the technology bubble of the late 1990s, much of the difficulty has been created by speculators looking for quick profits and by investors and bankers who ignored basic rules of risk management in an attempt to cash in while times were good. John McCain will not dip into pockets on Main Street to reward these people with a bailout.

Hillary Clinton's Gene Sperling:

Clinton called on regulators to take preemptive action -- including a foreclosure timeout, strengthening the Federal Housing Administration's capacities to respond to a crisis and cracking down on predatory lending practices with plain-language disclosure requirements. She has since called for a plan to encourage the restructuring of viable mortgages through a voluntary agreement to freeze interest rates on subprime adjustable-rate mortgages and a 90-day foreclosure moratorium. She immediately supported the legislation introduced by Rep. Barney Frank and Sen. Chris Dodd seeking a more systemic effort to unlock and restructure mortgages, and she continues to consult experts over the most effective method for doing so. [...]

On Thursday, Clinton proposed a second stimulus package, focused on helping at-risk homeowners and communities. Across the nation, concentrated foreclosures and vacant buildings are leading to downward spirals; they threaten to bring crime and blight into once-viable neighborhoods. In early January, Clinton called for a $30 billion Emergency Housing Fund to give localities broad tools to head off this threat, including the latitude to buy and rent out or resell such vacant properties. Today, even Fed Chairman Ben Bernanke is calling for policies to confront the community harm traced to "clusters of foreclosures." If we can provide a $30 billion lifeline for Bear Stearns, can't we afford $30 billion to prevent Main Streets from turning into mean streets?

Discuss.

Comments

Florentine Pogen | March 24, 2008, 9:31am | #

any legislation ought a be entitled "the overpriced real estate preservation act"

TeX Metaphont | March 24, 2008, 9:34am | #

Think of the bankers!

Won't anyone think of the bankers?!

albo | March 24, 2008, 9:35am | #

snail clout?
rail snout?
tail about?

Episiarch | March 24, 2008, 9:36am | #

I think I should go out and buy some overpriced real estate that I can't afford right now, since it seems that the government may end up covering it for me.

P Brooks | March 24, 2008, 9:41am | #

Clinton called for a $30 billion Emergency Housing Fund to give localities broad tools to head off this threat, including the latitude to buy and rent out or resell such vacant properties.

America's Landlady.

(in a, uhh, you know...)

Warren | March 24, 2008, 9:41am | #

John McCain sounds the least fiscally clueless.

I'm frightened.

John-David | March 24, 2008, 9:43am | #

Warren,

I noticed the same thing. Very scary.

R C Dean | March 24, 2008, 9:44am | #

What Warren said.

Could someone explain to me how Obama gives "significant incentives and guarantees for lenders" "without rewarding borrowers or investors who helped create the problem."?

P Brooks | March 24, 2008, 9:48am | #

significant incentives and guarantees for lenders to buy out mortgages that exceed the value of homes and convert them into stable 30-year fixed-rate mortgages that homeowners can afford.

I'm having a hard time conjuring up an idea of what those incentives would look like.

Kickbacks? Bribes?

Jay | March 24, 2008, 9:49am | #

RC Dean-

It's magic...

Jay

Phillip Conti | March 24, 2008, 9:50am | #

Could someone explain to me how Obama gives "significant incentives and guarantees for lenders" "without rewarding borrowers or investors who helped create the problem."?

I pretty much take it as a given that Obama will contradict himself.

Casey Serin | March 24, 2008, 9:51am | #

Hillary Clinton is an ultra-leftist gay man... not that there's anything wrong with that!!

Russ R | March 24, 2008, 9:58am | #

Before any politician offers up a plan to save America's housing and credit markets, they should be required to prove, without assistance, that they know the difference between a CDO and a CDS.

If they pass that test, then I'll listen to what they have to say.

gaoxiaen | March 24, 2008, 10:00am | #

It's called "Heads, I win, tails, you lose".

anon | March 24, 2008, 10:01am | #

" prevent Main Streets from turning into mean streets? "

Let's add our own silly metaphors:

"Bungalows into Bust-a-loans"
"McMansions into McScanty"
"Condos into Con-Doughs"
"Spec-u-vestors into Get-a-real-job-been-watching-too-much-Flip-This-House"
aww it's Monday.

Lost in Paradise | March 24, 2008, 10:05am | #

People with underwater/upside down mortgages don't need help, they need to get the hell out of the money pits they are living in and find rentals they can afford. It is not like they are losing equity - they have none, they have net debt.

Popping the housing bubble is necessary. Japan did it and they lived with the consequences. Yes, it has been 20 years of mild recession, but it beats putting the problem off and the bubble exploding in our faces.

gaoxiaen | March 24, 2008, 10:06am | #

Breechclout.

Bernd | March 24, 2008, 10:12am | #

McCain's hack sounds least vile, but in the end they all do the same crap anyway. Further deductions for McCain and Clinton using that tiresome "Main Street USA" meme.

dbcooper | March 24, 2008, 10:14am | #

So will any of them repeal the Community Reinvestment Act? I doubt it.

Aresen | March 24, 2008, 10:18am | #

McCain sounded like a winner with point 1), then totally pissed it away on 2), 3) & 4).

I truly think that if one of them were to say "We had a financial bubble, the fastest way out is to let the market clear. The people who created this situation - the lenders, the borrowers, the brokers and the investors - are the ones who should pay, not the taxpayers. That way, the next time a bubble starts to build, they will be a little more cautious", the pol would take a lot of flack, but his/her numbers would go up.

adrian | March 24, 2008, 10:40am | #

i find it very scary that i may be voting McCain to keep out the socialists.

John | March 24, 2008, 10:44am | #

"This is a responsible plan designed to help responsible homeowners without rewarding borrowers or investors who helped create the problem by gambling recklessly or committing fraud, and it asks both sides to contribute to the solution.

Obama would couple this plan with a direct interest-rate subsidy for low- and middle-income borrowers patterned on the mortgage interest deduction now predominantly used by high-income itemizers, as well as with comprehensive credit counseling, additional aid for loan workouts and reform of the bankruptcy code."


Implicit in that is that none of the speculators were low or middle income people. Bullshit. A lot of the worst offenders were low and middle income people who bought houses they couldn't afford with no money down figuring they could flip them in a short time and make money. Some universalized subsidy to low and middle income borrowers, whoever they are, is the last thing we should do.

Jefferson | March 24, 2008, 10:57am | #

Episarch is on to something - time to buy a big house with a teaser low interest rate right before the rates get "frozen" by the ice queen.

some fed | March 24, 2008, 10:58am | #

significant incentives and guarantees for lenders to buy out mortgages that exceed the value of homes and convert them into stable 30-year fixed-rate mortgages that homeowners can afford.

I'm having a hard time conjuring up an idea of what those incentives would look like.

FDR used the threat of nationalization. I think that's Hugo Chavez's favorite threat, too, when grocery stores charge too much, for instance. I see the tightrope between quasi-nationalization (and subsequent emmasculation as a source of profit) and bailout in much of this.

John | March 24, 2008, 11:01am | #

You know how this stuff goes. The feds come in and grandstand and throw a few people in jail and enact any number of inane regulations. Investor reluctance to take any risk after watching their buddies get barbequed by the feds combines with the newly enacted regulations designed to "stop preditory lending" combine to make it well neigh impossible to get a home loan. This of course will lead to any number of Congressional hearings over the next four years about how evil lenders have deprived Americans of the dream of home ownership.

Alan Vanneman | March 24, 2008, 11:02am | #

I'm shocked, utterly yada yada yada, that none of the candidates' "proposals" make any sense. (Though thank God that John McCain is unwilling to play election-year politics with this crisis! I was so fucking worried!) But what's seriously bad is that Bear Stearns stockholders want to "renegotiate" the sale of their company to J.P. Morgan by tripling the supposedly agreed-upon price. Well, let them renegotiate it WITHOUT the U.S. providing insurance for the worst $6 billion in loans. And if they'd rather try their luck in bankruptcy court, go ahead. Capitalism! Love it or leave it!

The Extispicator | March 24, 2008, 11:03am | #

I, for one, am quite disappointed in Hillary and Obama. I was hoping for plans to personally fly over most major cities with a bag full of cash throwing out wads to and fro.

I mean, they get the main idea, but its so much less fun their way...

Edward | March 24, 2008, 11:04am | #

Just like any physical illness--say a malignant tumor--market problems are best left alone with no human intervention whatsoever. Let nature un its course. Fooling around with the invisible hand of the market is like using birth control--it's a sin!

John | March 24, 2008, 11:05am | #

But Allan you have to understand that all those tough guys on Wall Street and "risk takers" are not actually supposed to go under. Some people are just to important to fail.

Screw them all. Don't offer one federal dime for any of them. Tell the banks to face reality and sell the collateral for what they can get now, let the market find its bottem and if banks go broke, they can stand as a warning to others. The longer we put off this pain, the worse it will be.

Ref | March 24, 2008, 11:06am | #

Edward is like Dan T. with a mean streak. In fact, I think Edward is Dan T.

Aresen | March 24, 2008, 11:10am | #

Ref

Sadly, no.

Dan T. could actually produce arguments on occasion.

John | March 24, 2008, 11:15am | #

OMG the housing bubble is going to explode. The last thing anyone would ever want would be cheaper housing. This whole thing shows where the real political power in this country is; the upper middle and upper class. This is all about upper and upper middle class voters no wanting to see their main asset, their home, lose value. Politicians are compliently looking to prevent just that. The idea that perhaps homes are overvalued by our insane tax system and by rampant speculation and that a lot of people would greatly benefit from lower home prices never enters anyone's mind.

J sub D | March 24, 2008, 11:33am | #

I have yet to decide who gets my vote in November. McCain's position just improved considerably.

I do want those who made stupid decisions, lenders, borrowers, and investment houses that purchased the bad loan packages to pay for their foolishness. I'm just plum out of sympathy for irresponsible fools.

John | March 24, 2008, 11:33am | #

When affordable housing is provided by the market it is called a crash and a catastrophe. When affordable housing is provided by the government, it is called housing projects.

Aresen | March 24, 2008, 11:51am | #

John, exactly.

I think there was a post a few months back about new developments in "depressed" areas being forced to incorporate "affordable" housing which wound up raising the price for everyone else.

The Wine Commonsewer | March 24, 2008, 12:14pm | #

I, for one, thank the feds for bringing me aboard as an investor in Bear Stearns. Too bad there won't be any ROI.

Edward | March 24, 2008, 12:35pm | #

Libertarian Doxology

Praise Market, from Whom all blessings flow;
Praise It, all creatures here below;
Praise It above, ye heavenly host;
Praise Investor, Banker, Holy Ghost.*

*Holy Ghost = Invisible Hand

Edward | March 24, 2008, 12:37pm | #

I'm just plum out of sympathy for irresponsible fools.

So you're leaving the movement, J sub D?

Edward | March 24, 2008, 1:01pm | #

Libertaian Creed

We believe in one God, the Market Almighty, the maker of wealth and prosperity, of all things we can buy.
And in one Lord Milton Friedman, the Son of God, the begotten of God the Adam Smith, the Only-begotten, that is of the essence of Adam Smith.
God of God, Light of Light, true God of true God, begotten and not made; of the very same nature of Adam Snith, by Whom all things came into being, in heaven and on earth, that we can buy.
Who for us humans and for our salvation came down from heaven, was incarnate, was made human, was born perfectly of his Blessed Father by the Invisible Hand.
By whom He took body, soul, and mind, and everything that is in man, truly and not in semblance.
He prospered, was exalted, alas was buried, but lives on today in the hearts and minds of the Libertarian faithful.
He is to come with the same body and with the glory of Adam Smith, to judge the policies and bromides; of His kingdom there is no end.
We believe in the Invisible Hand, in the uncreated and the perfect; Who spoke through Adam Smith and The Chicago School. We believe in the resurrection of the dead economy, in the everlasting judgement of leftists and pinkos, and the Kingdom of Libertopia and in the everlasting life of unfettered freedom forever and ever Amen.

P Brooks | March 24, 2008, 2:00pm | #

Still pissed at the Easter Bunny, I see.

J sub D | March 24, 2008, 2:00pm | #

Hi Edward. Got anything germane to post today? I'll wager not. Witless boors seldom do.

the innominate one | March 24, 2008, 2:12pm | #

having doubt?
tapped out?

Rhywun | March 24, 2008, 2:16pm | #

developments in "depressed" areas being forced to incorporate "affordable" housing which wound up raising the price for everyone else.

Nothing gets built in NYC without a certain percentage of it being "affordable". And people wonder why we have a two-tiered economy.

Edward | March 24, 2008, 2:20pm | #

You fundamentalist pricks are the bane of humanity.

T | March 24, 2008, 2:24pm | #

Libertarian Doxology

I'm much more interested in Libertarian Doxyology. Care to enlighten us?

On topic: the banks and everyone else need to go pound sand. I'm tired of every whiny bitch in a "vital" industry crying about a bailout when their piss-poor business practices cause problems. Everybody involved in the subprime meltdown was a greedy irresponsible git and should suffer for it.

Matthew | March 24, 2008, 2:29pm | #

Edward,

Most or all of the folks in this thread are favoring a market solution: Let the homeowners and the banks who enabled them fail e.g. lose the money they bet.

Otherwise they'll never learn.

Edward | March 24, 2008, 2:47pm | #

Matthew,

It's not market solutions I object to; it's the dogmatic assertion that market solutions are the only solutions. In fact, an entirely free and unfettered market has never existed outside the fervid imaginations of free-market fundamentalists. What really theatens the free market that does exist is a populist backlash against its excesses and failures. It's the free-market fundamentalists who never seem to learn.

Kolohe | March 24, 2008, 2:48pm | #

To be fair, Edward's stuff today is not great, (he's done better), but it's not bad either.

Edward | March 24, 2008, 2:49pm | #

What the fuck is a "doxyology"?

Edward | March 24, 2008, 2:54pm | #

Hail Market,
Full of Grace,
Prosperity is with thee.
Blessed art thou among systems,
and blessed is the fruit
of thy womb, Capital.
Holy Market,
Mother of Goods,
pray for us sinners now,
and at the hour of our bankrupcy.
Amen.

atrevete | March 24, 2008, 3:05pm | #

"But Allan you have to understand that all those tough guys on Wall Street and "risk takers" are not actually supposed to go under. Some people are just to important to fail.

Screw them all. Don't offer one federal dime for any of them. Tell the banks to face reality and sell the collateral for what they can get now, let the market find its bottem and if banks go broke, they can stand as a warning to others. The longer we put off this pain, the worse it will be."

Yes. John's got it exactly right.

What I DON'T like about McCain's solution is the idea that "we" can put safeguards in place to "make sure this never happens again". WHAT? HUH? Aside from the rhetoric that this is some kind of Holocaust, schemes with that absolute goal in mind end up being worse than the disease.

atrevete | March 24, 2008, 3:08pm | #

Edward, why don't you take your hilarious comments to Comedy Central or something.

They are stale, stupid, and SO not funny. They're just plain dweeby.

Masticator | March 24, 2008, 3:09pm | #

I thought when Ron Paul was mathematically eliminated, he'd be gone. "He" here is not referring to Ron Paul.

Edward | March 24, 2008, 3:09pm | #

atrevete

You're a typical humorless fundamentalist prick.

atrevete | March 24, 2008, 3:26pm | #

Edward

I know you are but what am I?

andy | March 24, 2008, 4:44pm | #

i can't decide if hillary's plan is complete economic incompetence or really competent textbook fascism.

andy | March 24, 2008, 4:46pm | #

and i agree with many others; it's like john mccain's trying to get me to not hate him anymore. sneaky bastard.

Matthew | March 24, 2008, 5:11pm | #

Edward,

A market solution to the current credit problem shouldn't be confused with free market "dogma" or free market "fundamentalists", whoever they are.

Nice try with the strawman though.

Edward | March 24, 2008, 5:38pm | #

C'mon, Matthew, you know you free-market fundamentalist pricks don't believe there is any solution other than a market solution to this or any other financial/economic crisis.

Edward | March 24, 2008, 5:40pm | #

Andy

You obviously wouldn't know fascism if it crawled up your leg and bit you dick off, you midless fucking fanatic.

J sub D | March 24, 2008, 5:57pm | #

Edward, a friend asked me to deliver this message.

Rhywun | March 24, 2008, 5:59pm | #

Edward, you ignorant slut, either the banks tricked the consumers in which case there are already laws in place to punish them, or the consumers were too stupid to know what they were getting into. Neither alternative is an excuse for taking money out of my pocket and handing it over to anybody.

DannyK | March 24, 2008, 6:13pm | #

Edward: cool it. Seriously, this is no way to discuss anything.

Everybody else: this isn't a real libertarian discusson until somebody explains that the current mess is the result of regulations, and that further deregulation will set everything right again!

Come on, who's a real libertarian in this thread?

Nicholas D. Rosen | March 24, 2008, 11:24pm | #

"The financial markets are suffering the after-effects of the bursting of a housing bubble." -- McCain's man

Right. Now I wish people would recognize that this was mostly a land price bubble. Henry George explained how land speculation causes unemployment and depressions, back in the 1870's. The more things change . . .