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All posts for the month February, 2009


When the victory din for Obama was ringing loudest, I must admit that I was caught up in the hope that a regime change was something more, that there was hope that this time. It would be an end to our past decades of policy sins. I should have known better.

Forget that Obama hires a Raytheon lobbyist Bill Lynn into the DOD (among other lobbyists) right after banning such action. Forget that former lobbyist Tim Geitner who now heads out treasury is a tax dodger. Forget the laughable half mil salary cap on fat cats, which only affects the top 25 employess (promote a few janitors) and ISN'T RETROACTIVE! Where's the accountability for the bailout money spent as CEO bonuses?

The hypocrisy of the left wing denouncing conservative tax cuts and ignoring democrat ones makes me want to just tell you to forget it all. But when I saw the mortgage relief plan, well I snapped back to reality. I hope you do too.

So pretend for a moment that throwing $275 billion at a trillion dollar hole was somehow enough. Here's the gist of the plan, with my comments in red:

  1. For 5 years, mortgage interest will be reduced by banks so that monthly payments are 38% or less of monthly income.
    So the tax deductible part is reduced, and even then for only 5 years. Right now it's a blessing to have any tax at all to deduct! Got Job?
  2. Treasury will help get this down further to 31%.
    …with our tax money. Just clarifying.
  3. Both banks and borrowers get paid for modifying their loan.
    We're paying these guys to do something they need to do anyways? Are the banks even trying to survive?
  4. Modified loans get bolstered insurance policies as an incentive.
    So that when fundamental real estate forces cause more foreclosures, the banks will get more protection for their assets. Aren't we supposed to be stemming those forces in the first place?

The best things for banks to do now (by my uneducated guess) is to modify as many loans as possible on the worst terms possible. This is a reckless win-win for the banks. Either get paid for modifying loans you had to anyways, or foreclose on modified loans if the asset price + insurance adds up to more than what the owner can short sale.

Really, the only solution right now is to define exactly how much capital banks need to survive, kill the real estate market to that level, and then give them the bailout money for that use only. Too bad that bailout money is made of caviar and yachts right now.

Long live change.