Skip to comments.An August Surprise from Obama? (Home loan forgiveness!)
Posted on 08/06/2010 9:59:56 PM PDT by narses
Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth.
(Excerpt) Read more at blogs.reuters.com ...
The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:
1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.
2) Wall Street banks are alerting their clients privately to this possibility. Here is what some are cautiously saying publicly. This from Goldman Sachs:
GSE policies are one of a dwindling number of policy levers the administration has left to pull, so it is conceivable that changes could be made, though there is no sign that a policy change is imminent. The Treasurys essentially unlimited ability to provide financial support to the GSEs creates an interesting situation over the next twelve months: the GSEs could potentially be used to provide additional support for the housing market and, to a lesser extent, the broader economy in 2H 2001.
And this from Mizuho Securities:
As policy makers ponder their next move the data suggests that they face not only a stalling recovery but a growing risk of deflation taking root in the economy. As a result, the Administration has turned back to industrial policies by approving the purchase of a sub-prime auto lender by GM as a means for pumping up domestic sales, especially since the latest auto sales data indicates that consumers are still responsive to incentives. This precedent increases the risk that the government will use its control of Fannie and Freddie to increase consumer cash flow and juice the economy again.
Moreover, Morgan Stanley is pushing a mortgage relief plan directly to Congress. On August 3, a top Morgan Stanley economist recommended to the Senate Budget Committee that Fannie and Freddie ease their lending standards to allow millions of Americans to refinance their mortgages.
3) Keep in mind the political and economic context. The nascent recovery is already running out of steam. Wall Street economists just downgraded the governments second-quarter GDP estimate of 2.4 percent to around 1.7 percent. And as even Treasury Secretary Timothy Geithner is warning, the unemployment rate may well begin to rise back toward the politically toxic 10 percent level given such sluggish growth. Many in the White House thought the unemployment rate would be dropping sharply by this point in the recovery.
But that is not happening. What is happening is that the presidents approval ratings are continuing to erode, as are Democratic election polls. Democrats are in real danger of losing the House and almost losing the Senate. The mortgage Hail Mary would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they and their children and their grandchildren would be paying for someone elses mortgage woes.
4) And dont think the White House is worried about financial market reaction. If they thought it would pass Congress, they would be submitting a $200 billion Stimulus 2.0 (3.0?, 4.0?) right now.
August is supposed to be a slow month for Washington politics. But maybe not this one.
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old news, already denied by the white house at least two days ago.
bump for later reading
Well there then, Obama says not true. We believe him, right?
Probably a “trial balloon”....I have a feeling they will try something like this....in some way....some time....even if they are denying it now.
It was denied by Treasury. If 0bama does it, then he would be fried because he chastized Hillary for suggesting this in July of 2007.
They might make the people underwater happy, but the rest of the country that will be stuck paying for it will be furious.
Oh goody, Barack Hussein obama (mmm mmm mmm)’s gonna pay my mortgage from his stash!
I agree, this was a trial balloon to gauge reaction.
And the fact that the White House actually had to SAY they weren;t going to do this means that “Trial Balloon” blew up in there faces.
If they dared to do this, there would be riots in the streets. THIS is the issue that triggered the Tea Parties, if you remember.
Could get a blip of new interest in the Rats this way, but how can everyone just forget the bumbles and stumbles since the dawn of the Obama era?
Maybe GOP will try to get smart and jump in front of the parade. But it couldn’t do anything sans Rats anyhow.
Me, if this happened, and I was eligible, I’d say thank you very much Bummer, now shoo Rats.
Yeah, if US has investments on the books in these guys, not the smartest thing in the world to just tell them to toss away a big piece of it willy nilly. More taxes, deeper debt, deeper deficit — a three sided devil. We want none of it.
I’m beginning to think that people are slowly getting him. Naive, trusting Americans let him and his handlers manipulate them into voting for an ethereal presence. This presence is turning into a nightmare for many who believed and trusted his rhetoric. I am so sad they didn’t awaken before November 2008. It could have saved our beloved country a lot of heartache and outright disaster.
Do you know any one who is off the bambiwagon? It seems he still has the African-american population and liberal white women.
OK, here’s a trial balloon to float. I know this will sound crazy, but these people seem to want to spend some money to stimulate the economy. They’ve already spent trillions in bailouts for wall street, banks, car companies, etc. So if they want to spend another paltry amount, I have this silly little suggestion. Tell me what you think.
300,000,000 people in the US (give or take). How about we give each of those people a million dollars each. That comes out to $300,000,000. Is that a lot of money for the folks in Washington who seem intent on spending BILLIONS on BAILOUTS?
But, imagine every man, woman and child in America getting a million dollars. You talk about stimulating the economy.
Tell me how my math is wrong. Why doesn’t anyone ever suggest doing this?
“It seems he still has the African-american population and liberal white women.”
And gays, which means he also has most of Major Media, too.
The point of “Stimulus” was never stimulus, for the Democrats. It was a MASSIVE ENRICHMENT for a group of connected Democrats, and their donors, who just happen to be the big bankers.
A huge Obama-run slush fund to buy votes with, Massive monies to Unions, Democrat-run cities, and “Community Organizers”, not a damn dime for Main Street.
it stimulated government, but not the economy.
Well, when it reaches my deep blue neighborhood, I'll let you know.
I'm still seeing:
* BO T-shirts being worn
* BO signs in people's windows
* BO bumper stickers on cars (but there are fewer of those now)
* BO life-size cardboard cutouts in certain businesses (which I refuse to patronize)
--all the above in neighborhood where business after business has failed, where stores are shuttered, where absentee landlords cull fruit from trees so as not to attract the homeless....