I recently read Obama's Housing Market fix and it is a big fat plan the kill the financial industry and is a $30 billion handout to housing speculators. Some of it even sounds dangerous to our fragile economy. It might even throw this country into a decades long depression. Also on reading it struck me that Obama hates the idea that taking on excessive risk (and not managing it) could cause you to lose a bunch of money or maybe even your house. However you could also make a ton of money as well. That is the nature of risk! In any case here we go point by point:
1. Provide the Federal Reserve with basic supervisory authority over any financial
institution to which it may make credit available as a lender of last resort.
I guess he wants the FED to actively check on what their borrowers of last resort do with their money. What sort of oversight does the FED have to do? Are they going to check the credit worthiness of the loans that that bank uses the FED money for? Will they be saying "this plan is just too risky for the FEDs money so Citigroup deny that loan?" Thus, the next Microsoft or Starbucks might just be getting their seed money from an Irish Bank and launching in Dubai instead of in the US. Good job, Obama you will made risk a dirty word and will have caused all the risk-takers to leave for greener pastures overseas.
2. Capital, liquidity and disclosure requirements should be developed and strengthened for all financial institutions.
So even more money will have to be set aside as capital requirements (and thus can't be loaned out,) and another layer of Sarbanes-Oxley nonsense will be put to banks in the future? I guess Obama wants to choke banks out and make it so that extending credit in the US a thing of the past. Also the idea of the Government looking over the shoulder of ratings agencies should be something that needs to be avoided. I guess the Government could take over as a ratings agency but isn't that like the bond issuer saying "yes our bonds are AAA *wink*?"
3. End our balkanized framework of overlapping and competing regulatory agencies.
I'm not sure if he simply wants to abolish the SEC, FDIC etc. or just roll them all into one complicated mega-agency? It seems like a pie-in-the-sky plan because those agencies are entrenched and some like the SEC are very effective at what they do. Also a vast agency will concentrate too much power into only a few hands. Finally, like any other mega-agency there will be fraud, waste, and abuse coming out of every pore.
4. Regulate financial institutions for what they do, rather than who they are.
I guess that is an interesting plan but you are punishing everyone for the excesses of a few. It is true that mortgage brokers like Countrywide originated these bad loans but why are we punishing the pension funds and the investment banks who just bought those bundled mortgages looking for a greater return for their shareholders? Also how can you regulate what something like an investment bank does? They are in so many parts of the economy that they would probably just move their headquarters to Dubai or something just to avoid the regulation morass.
5. Crack down on trading activity that crosses the line to market manipulation.
I think Obama needs to read what the SEC does on a daily basis. There might have been rumors swirling around Bear Stearns but no one could have stopped a canny trader from buying those $30 Puts on Wednesday and just following that 500K spike in volume and made money along with the big boys. You would have risked $15 a Put with a chance to make $1000s. Risk=Potential Reward Senator Obama.
6. Identify systemic risks to the financial system, no matter where they arise.
I guess this would be the department of reading minds or crystal balls or something. Maybe we can get Harry Potter to head it. I guess this puts the FED Chairman out of a job and allows Congress to grill some other poor fool about something they clearly do not understand themselves.
Create a New FHA Housing Security Program:
This looks like a strait prop-up that keeps housing prices going up and up artificially. If the I can get a government guarantee that I won't lose money in my home then sign me up. The trick is who is going to pay me for my home once I sell? A house is only worth what some other person would pay for the thing. If you bought at the wrong time you should not be rewarded.
Call on Lenders to Write Down Loan Amounts on More Conventional Borrowers at Risk:
So when house prices drop then the banks need eat the difference? That doesn't make any sense at all. This would mean that the banks take the risk that the prices would drop but the homeowner gets all the benefits. What happened to wait a few years until supply and demand get back into balance and then selling the home? You are underwater for a while but eventually things will pick back up. Markets are cyclical Senator Obama.
Close the Bankruptcy Loophole for Mortgage Companies:
So now we will have bankruptcy judges deciding on what interest rate would be fair in a bankruptcy proceeding? That doesn't make any sense. Bankrupt people with multiple homes and vacation homes usually have other revenue streams, securities, performing businesses etc. in order to pay off restructured mortgages. People that took on too much house and signed a no-money down ARM do not have anything left to pay the mortgage. Even if the thing was restructured they still couldn't pay for it.
Lower People’s Interest Payments by Creating a New Mortgage Interest Tax Credit:
This suggestion doesn't make any sense. This would provide a mechanism to get a tax credit even if you don't itemize deductions. What middle-class American with a mortgage doesn't itemize deductions? I think Obama has a pathological fear of itemizing taxes.
Provide an Additional $10 Billion of Mortgage Revenue Bond Authority:
He wants people who are lower income to buy a home? That also doesn't make any sense. People with low incomes usually don't have enough job security to keep up with 30 years worth of mortgage payments. We should be working on getting that low income person to become a high income person. They should be able to work for a decent company, start their own business, or aquire other skills. McDonalds has upper management that used to by fry cooks in just about every level of their company. They just had to work their asses off to get there.
Combat Mortgage Fraud and Predatory Subprime Loans: and
Mandate Accurate and Easy to Understand Loan Disclosure:
This seems like a laudable goal and should be pushed through. I think people not knowing what they were signing is what caused alot of this mess in the first place. Borrowers need to be given a point by point breakdown of how much they need to pay per month so that they aren't blindsided by ARMs in the future. So the borrower would see a table that has a cell that shows a 5% interest rate and you pay $900 a month, 6% interest you will pay $1100 a month, etc. That way people can budget and anticipate what they can afford before they sign any documents. If that McMansion causes them to pay $5K extra if the interest rate goes from 5% to 6% then the borrower needs to know that before he signs a single document.
Create a $10 Billion Foreclosure Prevention Fund to Help Americans Keep their Homes:
This allows people who bought too much house then they could afford keep their white elephant houses until they would be able to sell them. It looks like this would reward people for buying into the bubble instead of using sound fiscal constraint on what amount of house they could afford. So this pretty much amounts to Obama giving out billions for McMansion buyers and rips off people who were fiscally smart.
Provide $10 Billion in Relief for State and Local Governments Hardest-Hit by Housing Crisis toPrevent Cuts in Critical Services:
So if you are in a high speculation state like California, Arizona, Nevada, or Florida then Obama is going to give you some free money. I think someone needs to tell the Senator that part of the home price drop was due to homebuilders building tons of supply and speculators providing the demand. That demand dried up quick and those areas are now ghost towns. So some of the hardest hit areas are in states that had very high rates of speculation. The homes that we are talking about are usually luxury homes that some speculator tried to flip and now cannot sell or had to walk away from.
Extend and Expand Unemployment Insurance: I was with him on this until the last part and then it became asinine. Extending unemployment insurance to part-time workers makes no sense at all and would make quite a few high school and college kids suddenly able to claim unemployment. I guess this is to prepare the next generation of Americans be able to climb aboard the Obama hand-out wagon.
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