Economic Collapse - Fannie Mae and Freddie Mac have become gigantic financial black holes that the U.S. government endlessly pours massive quantities of money into. Unfortunately, if the U.S. government did allow Fannie Mae and Freddie Mac to totally implode, both the mortgage industry and the housing industry in the United States would completely collapse. So essentially the U.S. government finds itself between a rock and a hard place. Prior to the financial crisis of the last few years, Fannie Mae and Freddie Mac were profit-seeking private corporations that also had a government-chartered mission of expanding home ownership in America. But now that they have been officially taken over by the U.S. government, they have become gigantic bottomless money pits. It is hard to even describe just how much of a mess Fannie and Freddie are in. However, the unprecedented intervention by Fannie Mae and Freddie Mac in the mortgage market over the past couple of years has been about the only thing that has kept it from plunging into absolute chaos. So what does the future hold for Fannie Mae and for Freddie Mac? Well, according to one estimate, it could take another 5 trillion dollars to “fix” Fannie Mae And Freddie Mac.
Yes, you read the correctly. According to an article in the Christian Science Monitor, Fannie Mae and Freddie Mac are facing $5 trillion dollars in liabilities that the federal government is going to have to deal with one way or another….
An exit strategy could involve adding Fannie and Freddie’s roughly $5 trillion in obligations, in effect, to a federal balance sheet that already includes $13.3 trillion in federal government debts. The GSE obligations would be a different animal, because those liabilities would need to be covered by taxpayers only if things went bad in the housing market.
It is hard to even put into words how much money that is. If you were alive when Jesus was born, and you spent one million dollars every single day since then, you still would not have spent one trillion dollars by now.
But Fannie Mae and Freddie Mac are not a one trillion dollar problem.
They are a five trillion dollar problem.
And if the housing market gets even worse (which it will), that figure could rise substantially.
Of course the U.S. government should have never gotten into the mortgage business in the first place, but these days the U.S. government is intervening in virtually every industry.
And don’t expect U.S. government support for the mortgage industry to stop any time soon. In fact, U.S. Treasury Secretary Timothy Geithner says that the U.S. government plans to continue to play a prominent role in back-stopping mortgages in order to keep the U.S. economy stabilized.
But if the only thing keeping the U.S. housing industry from plunging into the abyss is unprecedented intervention by the U.S. government, what does that say about the overall health of the U.S. economy?
Mortgage defaults and foreclosures continue to set new all-time records even with all of this government intervention. In fact, major U.S. banks wrote off about $8 billion on mortgages during the first 3 months of 2010, and if this pace continues it will even exceed 2009′s staggering full-year total of $31 billion.
Not only that, but construction of new homes in the U.S. and applications to build new homes in the U.S. both declined to their lowest levels in more than a year during July.
And things are rapidly getting even worse for Fannie Mae and Freddie Mac. Mortgages held by Fannie and Freddie are going delinquent at a very alarming pace as the Christian Science Monitor recently explained….
As of March 31 this year, 6.3 percent of mortgages held by Fannie and Freddie are either seriously delinquent or in foreclosure. Although that’s down slightly from the figure three months earlier, it represents a big one-year rise (from 3.9 percent in early 2009).
An increase in delinquencies of over 50 percent in just one year?
That is not a promising trend.
If the U.S. housing market takes another big dive in the next few years, and things certainly look very ominous at the moment, what in the world is that going to do to Fannie Mae and Freddie Mac?
So what is the solution?
Well, on Tuesday the Obama administration invited prominent banking executives to offer their thoughts on the mortgage market.
So what was the consensus?
It was something along the lines of this: “Please, oh please, oh please continue propping up the 11 trillion dollar mortgage market.”
So much for capitalism, eh?
When even the banksters are begging for massive ongoing government intervention you know that the game has changed.
Adam Smith must be rolling over in his grave.
But this is where we are at.
We are on the verge of a horrific economic collapse, and it is only enormous intervention by the U.S. government that is holding things together.
Fannie Mae, Freddie Mac, the Federal Housing Administration and the Veterans Administration backed approximately 90 percent of all home loans made during the first half of 2010.
So where would we be without the government?
Of course we could let the whole thing collapse and allow housing prices to eventually settle at a level where people could actually afford them, but what fun would that be?
No, for now the U.S. government will continue to endlessly spend billions of dollars to prop up a system that is artificially inflated and that is destined to collapse one way or another.
The truth is that the American middle class is slowly being wiped out and they just can’t afford to pay $300,000, $400,000 or $500,000 for their houses anymore.
Without good jobs, the American people are not going to be able to afford hefty mortgages. Unfortunately, millions upon millions of middle class jobs are being offshored and outsourced every single year and they are not coming back.
There simply will never be a recovery in the housing market without jobs. But in the new global economy, American workers have been put in direct competition with the cheapest labor in the world. It doesn’t take a genius to figure out that jobs are going to be taken away from American workers and given to people who are willing to work for less than ten percent as much.
So, no, the housing market is never going to fully recover. Things got dramatically out of balance over the past couple of decades, and the housing market is going to try to restore that balance regardless of what the U.S. government does.
The U.S. government can continue to throw billions (or even trillions) of dollars at the problem, but in the end the underlying economic fundamentals are simply not going to be denied.
Friday, August 20, 2010
Thursday, August 19, 2010
Obama Mosque Stance Hurting, Gallup Finds, Americans Disapprove of It And Him
L.A Times - Democrat president Barack Obama walks off Air Force One somewhere new
President Obama busily continued his five-state cross-country political money collection tour today.
But he took time out to declare that he has "no regrets" about his firm statement of support for a new mosque and social center near the site in New York City of the Sept. 11 terrorist attacks.
Shortly after, Gallup released a new overnight poll showing, however, that many Americans have regrets that their president made that statement.
The new survey found that among the 57% of Americans with an opinion, 37% of Americans disapprove of the Democrat's mosque comments. Twenty percent support them. Another 41% said they don't yet know enough to have an opinion.
Two-thirds of Americans told Gallup they are paying a great deal or fair amount of attention to the mosque issue, which Gallup suggests is playing a role in Obama's overall approval this week falling to 41%, the lowest level of his 19-month presidency.
Of course, Obama's not on any ballot for the Nov. 2 midterm elections.
But many Democrats worry that disapproval of him, his administration, controversial legislative agenda and now a mosque could cost them control of at least one house of Congress.
The party of presidents under 50% approval in midterm years usually suffers severe....
Democrat president Barack Obama speaks at White house Iftar dinner in the White House 8-13-10 supporting a new mosque near 9-11 Ground Zero site
...congressional losses. And another Gallup Poll earlier this week shows the Republican lead on the generic congressional ballot has grown to seven points, its largest this year.
We published the full text of Obama's remarks, as usual.
Friday night at a sundown White House Iftar dinner celebrating the breaking of the day's Ramadan fast, Obama said Sept. 11 was a traumatic event, that he supported America's religious freedoms and "that includes the right to build a place of worship and a community center on private property in Lower Manhattan, in accordance with local laws and ordinances."
The next day criticism of Obama's mosque statement mounted. House Republican Leader John A. Boehner said:
The decision to build this mosque so close to ground zero is deeply troubling, as is the president’s decision to endorse it. The American people certainly don’t support it. The fact that someone has the right to do something doesn’t necessarily make it the right thing to do. That is the essence of tolerance, peace and understanding.
Former Republican Gov. Sarah Palin asked:
Mr. President, should they or should they not build a mosque steps away from where radical Islamists killed 3,000 people? Please tell us your position. We all know that they have the right to do it, but should they?
In Florida on another vacation, Obama attempted to clarify by saying: "I was not commenting and I will not comment on the wisdom of making the decision to put a mosque there." Later, however, aides said the president was not back-pedaling on his dinner statement.
Gallup's overall approval polling, which includes the first two days of fallout after the mosque statement, would appear to confirm that Americans heard him supporting the idea.
This afternoon ABC News reported that mosque supporters said they would need $100 million for the development and would not rule out accepting funds from Iran, Saudi Arabia and other nations.
Exactly why an already embattled U.S. president would voluntarily insert himself into what had been a local controversy, thereby poking the country's still-tender Sept. 11 scars and raising a Muslim place of worship to a divisive national campaign issue, has puzzled many political observers. Especially since there is another mosque just 12 blocks from the site.
On the other hand, if people are arguing about a possible mosque near ground zero, they're not debating the responsibilities of Obama and his large Democratic congressional majorities for the stubbornly stagnant economy, high unemployment rates and deficits, which previous polls showed were their most vulnerable political points heading toward November.
President Obama busily continued his five-state cross-country political money collection tour today.
But he took time out to declare that he has "no regrets" about his firm statement of support for a new mosque and social center near the site in New York City of the Sept. 11 terrorist attacks.
Shortly after, Gallup released a new overnight poll showing, however, that many Americans have regrets that their president made that statement.
The new survey found that among the 57% of Americans with an opinion, 37% of Americans disapprove of the Democrat's mosque comments. Twenty percent support them. Another 41% said they don't yet know enough to have an opinion.
Two-thirds of Americans told Gallup they are paying a great deal or fair amount of attention to the mosque issue, which Gallup suggests is playing a role in Obama's overall approval this week falling to 41%, the lowest level of his 19-month presidency.
Of course, Obama's not on any ballot for the Nov. 2 midterm elections.
But many Democrats worry that disapproval of him, his administration, controversial legislative agenda and now a mosque could cost them control of at least one house of Congress.
The party of presidents under 50% approval in midterm years usually suffers severe....
Democrat president Barack Obama speaks at White house Iftar dinner in the White House 8-13-10 supporting a new mosque near 9-11 Ground Zero site
...congressional losses. And another Gallup Poll earlier this week shows the Republican lead on the generic congressional ballot has grown to seven points, its largest this year.
We published the full text of Obama's remarks, as usual.
Friday night at a sundown White House Iftar dinner celebrating the breaking of the day's Ramadan fast, Obama said Sept. 11 was a traumatic event, that he supported America's religious freedoms and "that includes the right to build a place of worship and a community center on private property in Lower Manhattan, in accordance with local laws and ordinances."
The next day criticism of Obama's mosque statement mounted. House Republican Leader John A. Boehner said:
The decision to build this mosque so close to ground zero is deeply troubling, as is the president’s decision to endorse it. The American people certainly don’t support it. The fact that someone has the right to do something doesn’t necessarily make it the right thing to do. That is the essence of tolerance, peace and understanding.
Former Republican Gov. Sarah Palin asked:
Mr. President, should they or should they not build a mosque steps away from where radical Islamists killed 3,000 people? Please tell us your position. We all know that they have the right to do it, but should they?
In Florida on another vacation, Obama attempted to clarify by saying: "I was not commenting and I will not comment on the wisdom of making the decision to put a mosque there." Later, however, aides said the president was not back-pedaling on his dinner statement.
Gallup's overall approval polling, which includes the first two days of fallout after the mosque statement, would appear to confirm that Americans heard him supporting the idea.
This afternoon ABC News reported that mosque supporters said they would need $100 million for the development and would not rule out accepting funds from Iran, Saudi Arabia and other nations.
Exactly why an already embattled U.S. president would voluntarily insert himself into what had been a local controversy, thereby poking the country's still-tender Sept. 11 scars and raising a Muslim place of worship to a divisive national campaign issue, has puzzled many political observers. Especially since there is another mosque just 12 blocks from the site.
On the other hand, if people are arguing about a possible mosque near ground zero, they're not debating the responsibilities of Obama and his large Democratic congressional majorities for the stubbornly stagnant economy, high unemployment rates and deficits, which previous polls showed were their most vulnerable political points heading toward November.
Dems Use Food Stamp Money To Pay Michelle Obama Nutrition Program
Russell Berman - Democrats who reluctantly slashed a food-stamp program to fund a state-aid bill may have to do so again to pay for a top priority of first lady Michelle Obama.
The House will soon consider an $8 billion child-nutrition bill that’s at the center of the first lady’s “Let’s Move” initiative. Before leaving for the summer recess, the Senate passed a smaller version of the legislation that is paid for by trimming the Supplemental Nutrition Assistance Program, commonly known as the food-stamp program.
The proposed cuts would come on top of a 13.6 percent food-stamp reduction in the $26 billion Medicaid and education state-funding bill that President Obama signed this week.
Food stamps have made multiple appearances on the fiscal chopping block because Democrats have few other places to turn to offset the cost of legislation.
Party leaders raided the budget to find off-setting tax increases and spending cuts to pay for their top legislative priorities, including the roughly $900 billion healthcare law. Congressional pay-as-you-go rules require lawmakers to offset all non-emergency spending.
Democrats have turned to the food-stamp program because funding increases enacted in the stimulus package last year were already scheduled to phase out over time. The changes proposed in the state-aid and nutrition bills would simply cut off that increase early, in March 2014. Because the cuts would not take effect for more than three years, Democratic leaders have voiced the hope that they will be able to stop the cuts in future legislation.
But House liberals are balking now, saying that while they swallowed the food-stamp cuts to pay for urgent funding for Medicaid and teachers, they will not vote for more cuts in the child-nutrition bill. In a letter sent this week to Speaker Nancy Pelosi (D-Calif.), 106 House Democrats urged the Speaker to take the House version of the child-nutrition bill, which does not slash food stamps, rather than the Senate version.
“This is one of the more egregious cases of robbing Peter to pay Paul, and is a vote we do not take lightly,” the lawmakers, led by Reps. James McGovern (D-Mass.) and Keith Ellison (D-Minn.) said of their vote on the state-aid bill.
The House version of the child-nutrition bill, authored by Rep. George Miller (D-Calif.), passed the Education and Labor Committee earlier this year, but lawmakers must find a way to pay for it before it comes to the floor for a vote. “Chairman Miller is working to find other ways to pay for this bill,” a spokeswoman said when asked if cuts to the food stamp program would be used.
A House leadership aide noted that the food-stamp decrease approved in the state-aid bill will not take effect right away and will leave the program at the same funding level it was at before the stimulus law was signed. “That doesn’t mean many Democrats are not concerned about the issue, but this is a process which gives us time to deal with immediate issues (like jobs) and helping the economy grow, while giving you time to deal with the food-stamp issue,” the aide said.
The nutrition bill is clearly a priority for Michelle Obama, who has made a push for healthy eating — one of her signature policy issues at White House. When the House version of the nutrition bill won committee approval in July, it marked the first time she weighed in publicly on pending legislation.
The Obama administration has not directly addressed the debate over the food-stamp cuts, but it is backing the Senate bill. “We strongly supported the Senate action and look forward to working with the House to get a final bill onto the president’s desk,” an administration official told The Hill.
The $4.5 billion Senate bill would expand eligibility for school meal programs, establish nutrition standards for all food sold in schools and provide a 6-cent increase for each school lunch to help cafeterias serve healthier meals. The $8 billion House version includes more money for expanding access to school lunches for children in low-income households.
The deeper food-stamp reductions in the Senate version would set an earlier date — in November 2013 — for eliminating the increased benefits passed last year. A family of four would see their benefits reduced by $59 a month, or about 9 percent. The bill would also cut funding for nutrition-education programs aimed at low-income neighborhoods and households.
“It’s very sad. I think it’s just illustrating what dire straits our federal government budget is in,” said Sheila Zedlewski, director of the Urban Institute’s Income and Benefits Policy Center. “It’s unprecedented to raid one safety net program to feed another.”
The House will soon consider an $8 billion child-nutrition bill that’s at the center of the first lady’s “Let’s Move” initiative. Before leaving for the summer recess, the Senate passed a smaller version of the legislation that is paid for by trimming the Supplemental Nutrition Assistance Program, commonly known as the food-stamp program.
The proposed cuts would come on top of a 13.6 percent food-stamp reduction in the $26 billion Medicaid and education state-funding bill that President Obama signed this week.
Food stamps have made multiple appearances on the fiscal chopping block because Democrats have few other places to turn to offset the cost of legislation.
Party leaders raided the budget to find off-setting tax increases and spending cuts to pay for their top legislative priorities, including the roughly $900 billion healthcare law. Congressional pay-as-you-go rules require lawmakers to offset all non-emergency spending.
Democrats have turned to the food-stamp program because funding increases enacted in the stimulus package last year were already scheduled to phase out over time. The changes proposed in the state-aid and nutrition bills would simply cut off that increase early, in March 2014. Because the cuts would not take effect for more than three years, Democratic leaders have voiced the hope that they will be able to stop the cuts in future legislation.
But House liberals are balking now, saying that while they swallowed the food-stamp cuts to pay for urgent funding for Medicaid and teachers, they will not vote for more cuts in the child-nutrition bill. In a letter sent this week to Speaker Nancy Pelosi (D-Calif.), 106 House Democrats urged the Speaker to take the House version of the child-nutrition bill, which does not slash food stamps, rather than the Senate version.
“This is one of the more egregious cases of robbing Peter to pay Paul, and is a vote we do not take lightly,” the lawmakers, led by Reps. James McGovern (D-Mass.) and Keith Ellison (D-Minn.) said of their vote on the state-aid bill.
The House version of the child-nutrition bill, authored by Rep. George Miller (D-Calif.), passed the Education and Labor Committee earlier this year, but lawmakers must find a way to pay for it before it comes to the floor for a vote. “Chairman Miller is working to find other ways to pay for this bill,” a spokeswoman said when asked if cuts to the food stamp program would be used.
A House leadership aide noted that the food-stamp decrease approved in the state-aid bill will not take effect right away and will leave the program at the same funding level it was at before the stimulus law was signed. “That doesn’t mean many Democrats are not concerned about the issue, but this is a process which gives us time to deal with immediate issues (like jobs) and helping the economy grow, while giving you time to deal with the food-stamp issue,” the aide said.
The nutrition bill is clearly a priority for Michelle Obama, who has made a push for healthy eating — one of her signature policy issues at White House. When the House version of the nutrition bill won committee approval in July, it marked the first time she weighed in publicly on pending legislation.
The Obama administration has not directly addressed the debate over the food-stamp cuts, but it is backing the Senate bill. “We strongly supported the Senate action and look forward to working with the House to get a final bill onto the president’s desk,” an administration official told The Hill.
The $4.5 billion Senate bill would expand eligibility for school meal programs, establish nutrition standards for all food sold in schools and provide a 6-cent increase for each school lunch to help cafeterias serve healthier meals. The $8 billion House version includes more money for expanding access to school lunches for children in low-income households.
The deeper food-stamp reductions in the Senate version would set an earlier date — in November 2013 — for eliminating the increased benefits passed last year. A family of four would see their benefits reduced by $59 a month, or about 9 percent. The bill would also cut funding for nutrition-education programs aimed at low-income neighborhoods and households.
“It’s very sad. I think it’s just illustrating what dire straits our federal government budget is in,” said Sheila Zedlewski, director of the Urban Institute’s Income and Benefits Policy Center. “It’s unprecedented to raid one safety net program to feed another.”
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