Friday, August 31, 2007

It's a Bird, It's a Plane, No... It's Helicopter George!

Just when Ben Bernanke was about to throw in the towel and allow banks to have all the credit they want at the discount window, along comes George and his buddies with a better idea.

firefighting helicopter
[thanks to superspeelgoed.nl for the image.]

It doesn't matter that our President has lost his marbles (I'm beginning to wonder if he ever had any).

"President George W. Bush today pledged to help people who have fallen behind in their mortgages keep their homes and to tighten safeguards against predatory lending, while rejecting a bailout for 'speculators.' ''

That's right, George to the rescue. He may have missed Katrina, but he's got this one firmly in hand. He says:

"I plan to help homeowners. The government's got a role to play. It's not [sic] the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford."

Does that sound like a non sequitur to you? No matter. The article continues:

"Bush said he will let the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, guarantee loans for delinquent borrowers, allowing them to avoid foreclosure and refinance at more favorable rates.... Under Bush's plan, the FHA during the fiscal year beginning Oct. 1 would help in 80,000 more refinancings than under current programs, FHA Commissioner Brian Montgomery said in a conference call with reporters. The agency plans to help 240,000 homeowners refinance during the period, compared to about 100,000 during the fiscal year ending Sept. 30, he said. FHA intends to increase refinancings to more than 600,000 within the next three years."

This is insanity enough, but there's more, and here's proof:

"Bush 'is starting to sound like a Democrat,' Senator Chuck Schumer of New York, a Democrat, said in a news conference minutes after the president spoke. 'The president has gotten out of his ideological straitjacket and seen that in times of crisis' the federal government should help troubled citizens."

Need I add another word. And yet there is more:

"Schumer said U.S. Treasury Secretary Henry Paulson indicated interest in allowing Fannie Mae and Freddie Mac, the two largest U.S. mortgage finance companies, to exceed federal limits on their combined $1.4 trillion mortgage portfolios so long as they channel the extra financing to help borrowers refinance and avoid foreclosure."

Did I read that right? Fannie and Freddie will take on only those homeowners who are in trouble? That sounds like good, sound financial advice, and just what the doctor ordered for Fannie and Freddie, that both need desperately to balance out their portfolio imbalances before they implode.

Are these people nuts? Don't they know that the FHA, the FDIC, and all the other pension and monetary guarantees of the US government are not backed by sufficient funds to carry this load? Don't they know that the US people will be the only recourse via their taxes?

I think I'll go pound sand. It's probably a more useful endeavor. But before I go, just one last comment: Whatever happened to the Rule of Law? Market players have bought those mortgages under certain conditions of payment of principal and interest. They have calculated the return on investment within a certain time frame. They have contracted for these payments.

Do contracts no longer mean anything? Does no one realize that finance companies and borrowers have entered into a contract, and that changing the terms of that contract is what Henry VIII did with his edicts and his beheadings? Don't they understand that challenging a contract is one of the most serious errors a government can make? Don't they see that if you destroy the Rule of Law, you debark onto the path of the destruction of democracy as we know it?

I know, I know, the Supreme Court has already been doing a good job of that with their eminent domain decisions.

I'm off to the sand pile.

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