It's official. It's Presidential. The "Decider" has decided. Yes, Houston, we do have a problem with the housing mess. And yes, Congress, your White House is finally going to act to help homeowners hustled into sub-prime loans find some relief.
In a belated response to market meldowns, imploding companies (the number now stands at 145) and two million plus families facing foreclosure, when mortgages "reset," your compassionate conservative commander-in-chief has decided it's time to get involved, to show that the federal government is there in our hour of need. With prices and home value falling, building is grinding to a halt and economic growth is at risk.
We are still not sure how President Bush found out about this crisis, but August, in Crawford, seems to be a time for bringing warnings of imminent threats to POTUS' attention. Remember the Presidential briefing on August 6, 2001 warning that the United States was in imminent danger of being attacked y terrorists. Condoleezza Rice later admitted that nothing was done because Al Qaeda had not provided the date for their planned attack. Now, another set of advisors were on the case this August with a warning from the National Association of Business Economists about a serious new threat: "The combined threat of subprime loan defaults and excessive indebtedness has supplanted terrorism and the Middle East as the biggest short-term threat to the U.S. economy."
While some may think that the President acted just to defend low income owners, perhaps to atone for his earlier belated response to Katrina, there is another problem that the blue bloods in the GOP were keen that he be responsive---one closer to home--- the threat to their neighborhoods and voting base.
The LA Times outlined this emerging threat to this way:
"Houses abandoned to foreclosure are beginning to breed trouble, adding neighbors to the growing ranks of victims.
Stagnant swimming pools spawn mosquitoes, which can carry the potentially deadly West Nile virus. Empty rooms lure squatters and vandals. And brown lawns and dead vegetation are creating eyesores in well-tended neighborhoods.
It was time to act to save the suburbs and "well-tended neighborhoods."
This time, there will be no inflated war talk, heaven forbid a "War on Wall Street" or a declaration of a national emergency. That won't work, the pundits assure us. So instead we will throw money at the problem but not too much and make the rhetoric see beneficent Last Friday, the President announced some modest, mild, limited intervention-all terms used in the press-to put a band aid on this cancer, and whatever you do, don't call it a bail-out.
This initiative, aimed at helping a mere l8,000 families had these components.
- Urge Congress to pass legislation that would give the Federal Housing Administration more flexibility in assisting mortgage holders with subprime mortgages.
- Pledge to work with Congress to reform the tax code to help troubled borrowers rework their loans.
- Call for rigorously enforcing predatory lending laws and strengthening lending practices
Sounds good, but judging by the Orwellian way this Administration uses words, like peace to mean war, could this non-bailout really be a bailout?
The business magazine Forbes thinks so and reports that it is not the borrowers who are being bailed out but the lenders. They, unlike most of the media which reported it as if it was really a debt relief plan, called it "a Labor Day Gift to Wall Street."
In a Labor Day gift to Wall Street, President Bush on Friday announced plans to expand the Federal Housing Administration so that an additional 80,000 risky borrowers can benefit from its mortgage insurance program. In doing so, he sent a signal that the federal government would act to keep the market turmoil brought on by the implosion of risky mortgage lending from damaging the economy in an election season.
One of the more knowledgeable Housing blogs confirmed this is a bailout for lenders, not the borrowers:
The financial institutions that are calling most loudly for a bailout claim the Government must act to protect homeowners. However, the most severe losses will not be born by homeowners but by those who loaned them the money. Therefore any bailouts will ultimately go to lenders not borrowers.
The biggest predatory lenders understood and welcomed this nod and wink.
"Whatever he called it, stocks of financial services companies like Countrywide Financial and Bear Stearns which have been rocked by the implosion of their bad bets on risky mortgages, gained on his comments." Explained Forbes, "Investors took the comments to mean that whether or not Bush was calling this a bailout, the government was willing to step in and stem the bleeding."
And to make sure the industry has a continuing influence the firms are seeking help from insiders, but not just anyone. Financial News reports: "Lehman Brothers has appointed Jeb Bush to its private equity advisory board in the latest attempt by a buyout group to influence Capitol Hill. Lehman's move to hire the former Governor of Florida and brother of President Bush follows buyout giant Kohlberg Kravis Roberts hiring two former White House aides to lobby the US federal government on tax and regulatory matters affecting private equity."
And to make sure the Democrats don't get too uppity, the lobbyists are spreading money around on a non-partisan basis. Real Estate is a major political giver and its political action groups expect what they pay for. According to OpenSecrets, The National Association of Realtors is the number one lobbyist. "The NAR PAC spent $3,752,005 in the 2006 campaign: 49% to Democrats and 51% to Republicans. They raised $1,716,960 in contributions of $200 or more. The Realtors Political Action Committee (RPAC) is one of the largest trade association PACs, dating to 1943."
So let's not expect too much from either Party unless activists make this an issue too-an issue of economic fairness. The Administration says it now advocates "jaw boning"-ie verbal pressure-to persuade lenders to be nice their customers and not be too quick to foreclose.
But who is going to jaw bone the politicians to turn real pressure on with new regulations and investigations to penalize rather than protect those responsible? The real culprits are still living off their ill-gotten gains. New government data shows that the AVERAGE pay in Investment banking is $8, 367 a week compared to $841 for all private sector jobs. Hedge Fund managers are doing even better with an AVERAGE of $23, 846 to $16, 848 each and every WEEK. (Source: The New York Times.)
Here's the problem we need to talk about-how to contain, restrain and block the Credit and Loan Complex from further financializing our society by concentrating more power in industries that institutionalize extreme inequality and expedite the institutional rip-offs coming to light in this subcrime scandal.