Daily Archives: January 4, 2010
It appears a number of economists and financial experts see it as a failure. Not only a failure but an impediment to recovery.
The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.
The harm it has done is precisely the same harm that many of the larger programs have done, and something we warned about here at QandO at the time. Instead of letting the market take the hit it deserved for the bad risk it undertook and giving it an opportunity to digest that and then begin recovering, both the Bush and Obama administration’s chose to try and manage the crash and avoid the pain. Consider this particular program a microcosm of what many experts believe we’ll see happen in the larger economy. And, as usual, while it was something done with best of intentions it has run afoul of the Law of Unintended consequences and as critics are saying, has seemingly done more harm than good.
Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Homes Affordable, has raised false hopes among people who simply cannot afford their homes.
As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.
On the other side of the program are the lending institutions who some experts claim are using the program to delay an honest accounting of the toxic loans they have outstanding.
Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.
Instead, we’ve chosen to string this all out:
Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.
In other words, government intrusion – with the best of intentions – has impeded the market’s ability to properly reconcile the losses and begin recovering and learn from the experience. Instead, both homeowners and financial institutions have been given false hope that they can avoid this pain and somehow benefit from the program without having to do what is really necessary. And this false hope, upon which reality will eventually intrude, is simply delaying the financial reckoning and further delaying a real recovery. Once that is done:
“Then the carpenters can go back to work,” Mr. Katari said. “The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.”
The article goes on to discuss proposed fixes, tweaks and alternatives. But the bottom line is the existing program doesn’t help, but instead hurt the chances for recovery within the housing market. And that’s the lesson here. There is pain in life, but pain’s usefulness is its warning not to do what one did to incur it and to modify behavior in the future to avoid it. The problem with removing the pain quotient is the lessons necessary to modify future behavior and avoid repeating the painful activity are lost. Additionally, by attempting to avoid the pain, the present problem isn’t quickly fixed, but instead drags out as false hope does its damage before reality finally takes its course.
No one wants to see people lose their homes, but the fact remains many took on homes they couldn’t afford and many lending institutions backed their acquisition. This program isn’t going to make their homes more affordable to them nor is it going to make their loans good ones. Time for the players, not the taxpayers, to pay the piper. Government needs to back away. Until they do and the financial reckoning necessary takes place, the recovery in the housing market will continue to be delayed.
You remember the promise by the administration that “Sheriff Joe” Biden would be monitoring the stimulus fund use and calling out those who engage in waste, fraud and abuse?
If that were true, he should be almost living in New Mexico. However, my guess is New Mexico is just the visible tip of a fraud, waste and abuse iceberg associated with the 787 billion dollar “stimulus”. First we had money going to nonexistent congressional districts. And Joe was silent. Now we have money traced to nonexistent zip codes as well:
Closer examination of the latest recovery.gov report for New Mexico shows hundreds of thousands of dollars sent to and credited with creating jobs in zip codes that do not exist in New Mexico or anywhere else. Moreover, funds reported as being spent in New Mexico were given zip codes corresponding to areas in Washington and Oregon.
The recovery.gov site reports that $373,874 was spent in zip code 97052. Unfortunately, this expenditure created zip jobs. But $36,218 was credited with creating 5 jobs in zip code 87258. A cool hundred grand went into zip code 86705, but didn’t result in even one person finding work.
None of these zip codes exist in New Mexico, or anywhere else, for that matter.
Phantom jobs, phantom spending and nary a Sherriff in sight. Maybe he’s busy setting up the mechanism for corralling the 60 billion of waste, fraud and abuse in Medicare each year. You do recall that’s how they plan on “paying” for this new health care monstrosity, right? And they’re doing such a bang up job with the policing of the stimulus funds that we all ought to rest pretty easy, wouldn’t you say? I mean it’s obvious that Sherriff Joe has it all under control, isn’t it?
One of the favorite things the warmists like to do is point to isolated temperature events that bolster their cause and claim them to be a result of man-made global warming. I have to wonder what they have to say about an entire winter such as this:
They predicted no let up in the freezing snap until at least mid-January, with snow, ice and severe frosts dominating.
And the likelihood is that the second half of the month will be even colder.
Weather patterns were more like those in the late 1970s, experts said, while Met Office figures released on Monday are expected to show that the country is experiencing the coldest winter for up to 25 years.
The cold weather comes despite the Met Office’s long range forecast, published, in October, of a mild winter. That followed it’s earlier inaccurate prediction of a “barbecue summer”, which then saw heavy rainfall and the wettest July for almost 100 years.
Paul Michaelwaite, forecaster for NetWeather.tv, said: “It is looking like this winter could be in the top 20 cold winters in the last 100 years.
I look forward to the creative spin warmists will try to use to explain away what could be one of the coldest winters in 100 years right smack in the middle of this unstoppable warming they’ve been touting. Oh, wait, we’ve been cooling for 10 years haven’t we? So that trend would support such a winter occurring wouldn’t it?
Your turn warmists – why are we seeing this horribly cold weather while in the midst of a “warming trend”?
You tell me – an entitlement mentality, an over inflated ego, or just a pathetic moron?
“You’re going to be up against people who have an opinion, a modem, and a bathrobe. All of my life, developing credentials to cover my field of work, and now I’m up against a guy named Vinny in an efficiency apartment in the Bronx who hasn’t left the efficiency apartment in two years” — Brian Williams, anchor of the “NBC Nightly News,” speaking before New York University journalism students on the challenges traditional journalism faces from online media.
Apparently in William’s world, Vinny isn’t entitled to an opinion because he didn’t go to J School and hasn’t spent his life “developing his credentials to cover [his] field of work”, even though old Vinny has more readers than Williams has viewers and more credibility as well.
Words from a dinosaur that hasn’t yet picked up on the heavy impact meteor crash which has occurred in his world and spells eventual extinction for his kind. And, frankly, the sooner the better.