The line for food stamps is over there. This is the line for deficit-funded mortgage bailouts.

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

James Pethokoukis at Reuters:

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. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

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.

What would be the motive for doing something this dumb? To buy your vote, of course:

Keep in mind the political and economic context. The nascent recovery is already running out of steam. Wall Street economists just downgraded the government’s 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 president’s 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 else’s mortgage woes.

This strikes me as being amazingly inept just as a matter of political calculation. It’s horrifyingly stupid as economics, but that’s a given where this crew is concerned. But if they really think an obvious ploy to buy votes is going to do them any good, politically, they’re even dumber than we thought.

Consider:

1. August is too early for this kind of stunt. Even the most thoughtless of Americans can get a thought or two processed if you give them three months to cogitate. The meme will move from Big Mother to Big Smother by November.
2. Nothing will change, anyway. We’ve seen one idiot housing plan after another from the Obamanauts, and all of them have come to naught. The paperwork will be daunting, and the “success” rate will be negligible.
3. People who pay their bills vote. People who don’t — don’t. The net effect of this scam will be to further enervate every anti-Obama voter in the land.
4. More government-induced turmoil in the real estate market will create more uncertainty and doubt in the real estate market — which will in turn drive prices and sales volumes down even further.
5. What effect, do you suppose, that the further erosion of the idea of the obligation to pay one’s debts will have on markets in general? If we got a bailout in August, why not wish and hope and pray for another bailout next July?

By this point, I think the claim that Obama is a scheming, plotting socialist is specious. I think Obama is a bumbling idiot with a peculiar talent for always doing the wrong thing. The one benefit he brings to thoughtful, industrious Americans is an unequaled opportunity to discover the justice of capitalism — by forcing us all to wallow in the manifest injustices of socialism.