Congressional legislation H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008 (and the version in the Senate) should be voted upon. They have been drafted and bouncing around the Capitol for many months and it’s time to make a decision.
For most of the first half of this year, this attempt to fix American housing has lingered in Congress and this all came a long time before Treasury Secretary Paulson and the Bush administration proposed the Fannie and Freddie Bailout provisions they want to be affixed to the existing legislation.
In one week since OFHEO declared that Fannie and Freddie were well capitalized, we’ve had several Congressional hearings and the legislation including the Paulson plan is likely to be voted on in a few days. Wow! Isn’t this amazing? What is the old saying about the “wheels of government?” Somehow this do-nothing government is moving at lightspeed to approve something that it couldn’t approve for months. HMMMMM!?! What’s the hurry? If Fannie and Freddie are not going to need the unlimited nationalizing help, then what’s the hurry? I am not the only one asking the question. In fact, check out this story about Rep. Boehner (R-OH) and Rep. Bachus (R-AL) and others who want this slowed down.
Unlike the President who said:
“I urge members to move quickly to enact the plan in its entirety, along with the good oversight legislation that we have recommended for both Fannie Mae and Freddie Mac,” Bush said at a news conference today. “This is a part of the, should be a part of the, housing package that is moving its way through the Congress. And I hope they move quickly.”
And unlike Sec. Paulson who said in his Tuesday testimony:
I look forward to working closely with you, your colleagues in the House, and Congressional leadership in both chambers to enact this plan as part of a complete legislative package, as soon as possible. Thank you.
What’s the hurry? Please ask yourself that question. Whenever our government does something in a hurry, how does it turn out? What is really going on here?
What additional pork is going to be thrown into the legislation because they know the President will sign it if he gets what he wants “quickly”? What’s the hurry?
Mish wants you to contact your political representatives. I encourage you to read his thoughts on this subject by clicking here.
Personally, I want them to vote on the existing legislation without the Paulson Plan attached. Let’s get them to show their support for the original bills.
Then, let’s have a separate bill as proposed by Secretary Paulson. I want to see which politicians are in favor of making the nationalizing of our financial system a probability. I want this extremely important moment in American history to stand on its own and I want the Yeas and Nays to be associated with each member of Congress to be known forever.
Some Senators and Representatives agree with President Bush and Secretary Paulson that the new Fannie and Freddie provisions be attached to the existing legislation. Okay, if it is so important…then why wasn’t it in there months ago? Why is it necessary now but not necessary before? What would they have done if the existing legislation had been signed into law last month? Would they have not wanted the Paulson plan if it was needed now but couldn’t be attached to legislation that had already become law?
What disaster are we avoiding? Do you really think it has to do with an urgent need to provide mortgages or prevent foreclosures and housing price declines? I don’t. Those are long, drawn out problems that will not be solved “quickly” or “as soon as possible.”
Would it be a disaster if Fannie and Freddie had their equity worth $0.01 per share? Maybe for existing shareholders but would the decline in the stock market’s value of the GSE’s mean that they could not function with their existing “well-capitalized” (per OFHEO) structure? Their market cap is only a combined $14 billion right now. That’s a lot of money but quite a lot less than the cost of our wars or the cost of the Bear Stearns bailout. What’s the hurry now?
How are those Fannie and Freddie credit default swaps doing? What kind of cascade would we have if the GSE CDS contracts couldn’t avoid counterparty risk?
What are we missing? What big problem is Secretary Paulson and the administration trying to avoid? What problem are they needing to solve now that they didn’t need to solve “quickly” two weeks ago or for that matter, years ago. What are we missing?
This article has 3 comments:
The bill is loaded with irony, particularly in view of the fact that it's called the Foreclosure Prevention Act.
If you look closely, this legislation is likely to help cause new foreclosures...
IME, the only rush is that the sooner a bill gets passed, the sooner the Republicans can point to this and say that they "did something" about the situation.
If a bill gets passed quickly, the Dems won't be able to wring any more press out of the issue.
After all they still consider this a sub-prime problem.......
the above is a rough but reasonable example of what's happening to MANY across the country.
Now, here's the RUB...with the Proposed Housing Package...
1. It will give you "renegotiated" lower payments...SO YOU DON'T GO INTO FORECLOSURE...
2. BUT THE PROBLEM IS: THOSE NEW LOWER MORTGAGE PAYMENTS ARE STILL BASED ON A "500K" HOUSE...that is NOW WORTH ONLY 350K (and headed LOWER)...
3. So, you'll take THE NEW LOWER MORTGAGE PAYMENTS...so you don't have to move ahead of time...but what is the "investment incentive" in this for you...
your house WILL NOT RECOVER your 100K LOSS...THE BANK is just FORESTALLING ITS 50K LOSS...which will keep INCREASING...
4. So, you are in a NO RECOVERY situation...AND SO IS THE BANK (fnm, fre, or OTHER).
5. This is JUST A STALL...not a REAL SOLUTION...
6. You, will move and DEFAULT when it's convenient OR YOU HAVE TO (job transfer/loss, etc.) ...BECAUSE YOU'LL WILL NEVER RECOVER YOUR 100K LOSS...
SO, THERE IS "NO REAL INCENTIVE FOR YOU TO STAY" IN A HOUSE that
you will NEVER MAKE A PROFIT ON.
7. REAL ESTATE has to TANK TERRIFICALLY to LEVELS probably well more than 50% to even have a chance of garnering a SIGNIFICANT NUMBER NEW BUYERS to turn the recovery tide.
...and this HOUSING SUPPORT BILL ...trys TO ONCE AGAIN FORESTALL ...
EVERYONE "TAKING THEIR MEDICINE!"
"SIGNIFICANT LOSSES FOR BOTH BORROWERS AND LENDERS...all those who were
part of the REAL ESTATE RUNUP PONZI (CHAIN LETTER) GAME...
all this scheme did was PUT THE ENTIRE ECONOMY AT RISK...and in disruption...
screwing up the "rest of the population" who were NOT MUCH INVOLVED or aware
of THE BANKS GAMBLE...on what looked like "EASY MONEY" instead of Old BANK style CONSERVATIVE MODEST REVENUE STREAM!
HOUSING HAS TO "TANK" REALLY BIG TIME ...LIKE OVER 50% for a chance of recovery...(to garner a sufficient number of buyers).
both homeowners and LENDERS are in DENIAL about this AND PUSHING GOV TO SAVE THEM AND THEIR PONZI SCHEME FAST EAST MONEY...
AIN'T GONNA HAPPEN...
we go DOWN...you already know "your" house did...BUT THE "LENDERS" (BANKS) ARE STILL SCRAMBLING FOR A "MAGIC BULLET!"
there ain't one...so the gov is doing the "get ready" to take MANY OVER...
FINANCIAL SECTOR...pretty much TOAST...for most!
flashrob