Foreclosure Prevention Nonsense

I have been talking about the non-stimulus of tax rebate checks for a while. My latest were Stimulus Checks Already Spent and Economic Stimulus Not a Silver Bullet.

Professor Kevin Depew added yet another reason today why there will be no stimulus from stimulus checks. Please consider Point number 1 of Thursday's "Five Things".

1. Where Your Tax Rebate Is Really Going

Economic "stimulus" the form of tax rebate checks is on the way, and in some cases may have already arrived in a few mailboxes. But economists remain divided on, a) how much of those rebate checks will be spent to boost the economy, b) how much will be socked away in the bank and saved, or c) how much will be used to pay down debt. The reality is it may be none of the above.

The Financial Times this morning had an interesting piece on what looks like it will be a first wave of a multi-wave event: California state legislators are considering radical revenue-raising measures including a new services levy and a temporary tax on high earners to address a budget crisis that has spiraled into a $20 billion deficit. As one of the states hardest hit by the real estate bubble collapse, California is struggling. Yesterday Vallejo, a city in in northern California, voted to file for bankruptcy protection after running out of money...

It's a game of smoke and mirrors; tax money that would have gone to the federal government, instead goes back into our pockets so that it can pay a portion of the tax increases that will soon accumulate at the state and local level. There is no free lunch, not where taxes are concerned.

No free lunch is correct.

And that is important to keep in mind as the city of Vallejo is struggling in bankruptcy because it made too many promises it simply cannot keep. Please see Hardball In Vallejo, No Balls In D.C. for more on Vallejo and what may be facing scores of cities as the recession worsens.

By the way, the concept of no free lunch applies equally well to the myriad of proposals supposedly designed to bail out homeowners and/or stimulate the economy. All these programs will do is rob Peter to pay Paul, when Paul was a spendthrift buying more house than he could afford, with financing provided by lenders that should have known better.

Foreclosure Prevention Madness

Bloomberg is reporting U.S. Senators Agree on Foreclosure-Prevention Bill.

U.S. Senate leaders agreed on legislation aimed at curbing home foreclosures, dropping a provision that would have allowed judges to alter mortgages for borrowers in bankruptcy proceedings.

The plan includes funds for foreclosure-prevention counseling, tax credits for people who buy foreclosed homes and clearer loan disclosures for consumers buying a home, according to an outline of the proposal released today by Senate Banking Committee Chairman Christopher Dodd and the panel's top Republican, Richard Shelby...

Dodd and Shelby's plan would offer a $7,000 tax credit for people who buy homes in foreclosure to be claimed over two years, $10 billion in federal tax-exempt, private-activity bonds for refinancing subprime loans, and $100 million for housing counseling to help homeowners avoid foreclosure.

Bush Threatens Veto

President Bush has threatened to veto this bill. Please call and/or email the White House to voice your support of a presidential veto of any housing bailout bill:

Phone: [phone] or 202-456-1111

Just say, "I am calling to ask you to veto any housing bailout that comes out of Congress."

Click Here To Email President Bush: [e-mail]

Economic Stimulus Nonsense

The entire concept of a 'stimulus plan' is complete nonsense. The government cannot, and does not, create additional resources. It can only take money from 'A' and shift it to 'B' , either via confiscation (taxes), borrowing, or printing.

In the first two instances, money goes from one pocket into another, in the latter case, the entire money stock loses value to the extent that additional money is printed. Not one of these cases results in an economic gain. On the contrary, this artificial redistribution hampers the flow of scarce resources to where they are needed most, and thus delays economic recovery.

Comments

[Small Town Indiana]

I think you hit the "nail on the head". I concur.

[fabien_hug]

I concur too.

[Outside Observer]

My jaw hit the floor when I saw the salaries. Vallejo must be the pyro & kleptomaniac capital of the world! ;)

[JimCollins]

This would explain the complete utter failure of the fraud that was the "New Deal" under that Socialist Roosevelt. Oh, wait a minute...

[Worcester MA]

Great points. We need to get the idea of No Free Lunches into mainstream discussion. The public sector burden on the private is growing across the country and we're going to simply pass it on to the next generation (kick the can down the road). Everyone looks to the gevernment(s) as Daddy: please bail me out. Things have sure changed since John Kennedy paraphrased a Greek during his inaugural address, when he said "...ask not what your country can do for you, ask what you can do for your country..."

[gordon]

A study on Bush's 2001 "stimulus" was done by his own administration! Only 19% was spent, the rest applied to debt and saved by the well-off.
Millions of Americans have signed AGAINST this mortgage bailout on angryrenter.com. It involves the FHA taking these mortgages at 85% of " appraised value", so the investment bank broker-dealers, and
banks take a 15% haircut, and we responsible taxpayers and our kids are the BAGHOLDERS. Why? Because the government has already HIRED THEIR OWN APPRAISERS. What does that tell you?
Many of these homebuyers will default anyway, as prices go lower by 20%+, to 2004 levels, the last time debt/equity (loan/value) was at a more historical level. The government is about to HIGHBALL the APPRAISALS, should this not be vetoed.

[icandoitdon]

i'm afraid the "new deal" is exactly what not only americans expect of their government but what corporations expect of their government. profits go to me, losses go to you.

the problem is us.

[tellittothepeople]

Make the phone call now to ask the president to veto the housing bailout bill instead of writing useless blogs.

[curious cat]

you know, most of the active crazy people in this country live in either california or the new york area. why do we have to suffer whenever they drink cool aid? ok, there may be a few whack jobs in other states who think they are entitled to something, but they are pretty much spread out. they usually do little damage in those areas, unless the media spots them sitting on the roof after a flood.

one of the worst things that ever happened to this country, and possibly the world, was the invention of television. a nation was hypnotized into thinking they could do whatever they wanted, suffer no consequences and become stars. game shows made instant millionaires and the media turned sports figures and other entertainers into role models.

we cannot put things back into pandora's box, but we can take some solace from our rapidly maturing internet. people other than liberal media mouthpieces finally have a voice. common, rational people, who are being injured by the constant yammering of greedy children, can finally balance the scales. listen up, please. the man said, "NO MORE FREE LUNCHES!"

most of us have some sort of crutch that we lean on to filter out the madness. we drink, smoke, take drugs, listen to loud music, over eat, run away, whatever. please examine the crutches in your life and ask yourself what it is that drove you there.

if the answer is the irrational decisions and arguments of others, take a moment and confront their whacko positions and demands. voice your own rational opinion. don't stay quiet for the sake of peace. your acquiescence makes them think they are correct. your silence empowers them and frankly, i'm tired of doing your job for you. why should i have to correct your misguided spouse, child, parent or best friend , just because you were unwilling to do your part. you could have stopped them when they were just slightly off, instead of letting them get to the point where they need radical reorientation. let's step up....

[captain-kirk]

Here Here!!!!!!