Pointing Fingers-An Old Game Repackaged

Why did this bailout bill fail?  Here are a few suggestions:

  1. Senator Obama, Nancy Pelosi and Chris Dodd’s complete lack of leadership.  The Democrats control both houses of Congress yet they can not muster enough votes to pass what they see as an extremely important piece of legislation.  Senator McCain brought in over 60 Republicans on this issue when he was in Congress over the weekend.  Senator Obama called in his support but made little effort to support this legislation, instead relying on his Monday morning quarterbacking skills to praise or denounce the bailout vote, whichever was needed politically.  Chris Dodd, Speaker Pelosi and Barney Fife, I mean Frank, could not even get their members to agree on this bill, choosing instead to blame others for its failure.
  2. Politics. I don’t mean Presidential here either.  The Democrats wanted to be able to blame the Republicans for passing this bill.  13 of 19 Democrats who are in tight races across the country voted against this bill AFTER they saw the Republicans voting against it.  If it passed with Republicans putting it over the top, the Democrats would run stories and ads about how they didn’t really want the bill.
  3. Wall Street.  When the bill’s passage seemed certain stocks looked good.  However oil prices shot through the roof on speculation that consumers would have a lifeline to borrow from this winter to pay for oil.  As the bill failed stocks fell.  And now faced with the possibility that consumers could not afford to pay for oil this winter, oil prices fell to under $100 a barrel.  Wall street traders and speculators were once again left to find their own solutions and face the fact that they may lose money this year.
  4. The American People.  Finally enough of us woke up and said ENOUGH!, let Wall Street fail, we’ll cut back, we don’t need all this credit.  Unfortunately, there is little we can do to prevent eventual passage and we will have to swallow a $700 billion dollar pill in order to save a couple bucks, and I do mead about $2, in our 401K accounts.
  5. World Markets.  They need this just as much as our market.  They hold many of these bad debts and don’t want to lose money on them either.  Yes, Asian and European markets will get some of this $700 billion.  But as they begged for us to pass a bailout to save their economies, the people of these countries continued to rally against America and it’s trade policies.  Perhaps some of our Representatives finally realized that not all of $700 billion will go to Americans.
  6. Stupid Partisan Speeches.  Only one party to blame here and it is the Democrats.  When Speaker Pelosi stood up and said that Bush and his “right wing ideology of anything goes, no supervision, no discipline, no regulation” was to blame for this bailout, she effectively killed the legislation and allowed Republicans to not only make a stand but also push for more insurance on deposits and other provisions they wanted in the bill.
  7. Lastly, the Media.  America is at the beginning of a recession.  However so far it is the mildest recession in our nation’s history.  Today my newspaper reported a jobless rate of 6.1%.  When I moved back here 10 years ago the jobless rate was hovering between 8-10%.  Wages have gone up steadily until recently and it was only after the minimum wage bill passed in PA (now 7.25/hr)  and the Congress that unemployment stated to rise because small employers could not afford the increase.  By the way out of their laundry list of promises they made when they were regaining control of Congress, the minimum wage adjustment is the only one that has passed.  All of the others (think Iraq) have failed or not even been discussed out of committee.  Yet the media continues to prey on the fears of all of us and attaches stories about the Great Depression to discussions on the bailout.  Perhaps they played their monster in the closet card one too many times this week. 

In the end the result of the bill was the same- Republicans are to blame for the economy, according to Democrats.  If it passed it would have been a Republican President and Congressional Republicans who forced it on every one of us.  The news article in my issue of the Time Leader would have read ” Rather than repudiating their President for this mess, Republicans chose to support their President’s failed economic policies.”.  When it failed it was the Republicans who killed it because they did not support their President.  As the Times Leader paraphrased Barney Fife, oops again, Frank today  “Rather than a repudiation of Democrats…Republican’s refusal of the bailout was a rejection of their President.”  

I still hold to the fact that all Americans are to blame for this situation and not any one party.  Certainly rules were relaxed and it started when Clinton was in office and continued through Bush, but Americans did not have to accept money we could not pay back.  Case in point.  When I bought my house I was approved for a mortgage up to $150,000.  After laughing my ass off because I knew that the mortgage company had been drinking while doing these numbers, I chose to go with a mortgage I knew I could afford.  There are many others who took the full amount, thinking they could or would be able to afford it and are facing foreclosure because of that decision.  That’s not the fault of your leaders.

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Yes, Virginia, There are Specifics!

Be warned, this is a bit long but it is specific.

In covering the failing banking industry and the mortgage mess,  the media has been throwing around words like disaster,  crisis, and dire like peanut vendors at a baseball game.  Their irresponsible use of these words has prompted many questions about what McCain and Obama would do as President to correct what is happening on Wall Street and Main Street.  Here are the plans of both candidates.  The information on Barack Obama’s plan is taken directly from his “Blueprint For Change” while information on John McCain’s plan is taken from the expanded issues section of his website. 

To provide relief for millions of people affected by the mortgage mess and the Wall Street debacle, Sen Obama has proposed a 10% universal mortgage credit that will provide $500 to about $10 million homeowners.  The credit will help those making under $50,000 who do not itemize their taxes. 

Additionally, Sen Obama will create a new HOME (Homeowner Obligation Made Explicit) score that will allow borrowers to measure their available mortgage options and will help them understand the full cost of the mortgage they enter into with a lender.  This provision would seem to help new borrowers more than those already in a mortgage.  It also keeps the borrower as the primary decision maker and leaves the burden of responsibility firmly with the borrower, which is where irt needs to be.  However, there is nothing to stop the banking and investment industries from manipulating this score just as they manipulated numbers to get people into the sub prime mortgages in the last few years. 

Finally Senator Obama has proposed, in his “Blueprint for Change”,  a government fund to help “innocent” homeowners.  While “innocent” is not defined by Obama I imagine that it means those homeowners who took out a bigger mortgage than they could afford on an adjustable rate loan.  This fund would be paid for by the money received from increased penalties on lenders who have acted irresponsibly (those lenders currently going under?) or those convicted of fraud.  While this sounds good because it targets the corporate greed Sen Obama and his colleagues hate,  the fund is based on  passage of what Sen Obama calls “his record” on this issue, the Stop Fraud Act. 

The Stop Fraud Act is a bill sponsored by Obama and Dick Durbin that defines mortgage fraud, increases funding for law enforcement (?), and enacts new penalties for those found guilty of fraud.  It also requires the industry to report suspicios activity, it does not say to who.  The bill has been introduced to committee and referred to another committee, it has not been passed by the Congress, nor is it close to a general debate on the floor.  By the way it was introduced in 2007 so I do have to ask where was his leadership on this issue?  http://www.govtrack.us/congress/bill.xpd?bill=s110-1222

Now onto Senator McCain. 

Senator McCain has proposed a “Home Plan”,  unfortunately HOME does not stand for anything cute like in Obama’s plan.  Under this plan, Sen McCain would offer borrowers the chance to trade an existing mortgage that they can not pay for a mortgage that is more manageable under a fixed rate and reflects the market value of the home at the time.  Of course there are restrictions but they favor those being hurt by their current situation.  Those restrictions are as follows:

  • an eligible sub prime loan after 2005
  • prove your credit worthiness at the time of the original loan ( something you have to prove any way if you get a mortgage the right way)
  • are delinquent on payments or facing a reset or show that you can not meet your current obligations and
  • can meet the terms of a new fixed rate, 30 year, FHA backed loan

Under McCain’s plan there is no H.O.M.E. score or federal fund that has to be passed first.  The plan has elements of a bill introduced by two Democrats (there is that record of bi-partisanship again), Barney Frank and Chris Dodd.  The plan does require banks to forgive part of the loan principle and write a new loan for borrowers but the other option for the bank would be foreclosure, an option that would probably cost them more. 

Borrowers under McCain’s plan also can apply by picking up a form at the post office or printing a form from the internet (is that a use of technology by McCain?).  From there once the request is sent in, the loan request is approved by the FHA based on qualifications and then sent to the bank where the homeowner has their existing loan who retires and rewrites the loan to loan backed by the FHA. 

Of course Sen McCain’s plan also addresses the speculators and financial market practitioners who handed out the sub prime loans in the first place.  If a bailout is needed, Sen McCain believes that it should come at a cost to the financial industry, not taxpayers.  A bailout would happen only to prevent failure and in return that institution would face greater transparency and accountability.  This is the case with AIG, an institution that, if it failed and did not receive a partial bailout, would affect people around the globe.  Perhaps the 9/11 commission Sen McCain has proposed recently would provide the transparency necessary to determine why the current situation happened and how it can be prevented in the future. 

There are the two plans in detail.  Of course I’m partial but as I see it, Sen Obama’s plan relies heavily on government and passage of bills and recommendations in Congress that have already taken over a year to go to committee.  Unlike Sen Obama’s plan, Sen McCain’s plan could be instituted fairly easily and does not rely on new penalties that have not been discussed in committee yet.  In addition penalties already exist under current banking laws (http://blownmortgage.com/2008/02/03/barack-obamas-mortgage-reform-policy/ for some insight) for lenders who engage in deceptive practices. 

Sen Obama specifically points out that 10 million homeowners will benefit under his tax credit initiative.  That is a far cry from the 200-400 million people Sen McCain is proposing to help immediately.  Make your own choice on this issue but these are the facts and plans as stated by each candidate on their official websites.  Hopefully, I will also be highlighting other issues in the future. 

 

Lipstick Jungle

Senator Obama was unscripted gain yesterday when he said if you put lipstick on a pig it’s still a pig.  On the heels of what Governor Palin said during her acceptance speech, this comment seems directly aimed at the Republican VP candidate. 

Of course I understand the point that Obama was trying to make.  Pig is a code word for earmarks in Washington and Sen Obama, in his inexperienced way, was hopefully just trying to connect Governor Palin to pork barrel spending.  But Sen Obama was not talking about earmarks when he said it, he was discussing Senator McCain and Governor Palin’s views on changing Washington.  While obviously upset that Sen McCain is now seen more as the candidate of change than himself and his VP candidate that has been in Congress 10 years longer than McCain,  Sen Obama needed to do a better job of explaining what he meant in those if the cuff remarks. 

I will not say Sen Obama is playing the gender card, yet.  But he is obviously still at a loss on how to go after a McCain/Palin ticket that promotes the record of change each candidate has without exposing his own inexperience and lack of real reform.  Sen McCain and Governor Palin both have records readily available to the public that show how they fought corruption and enacted reform.  In the case of Senator McCain he has tried to enact reform, however controversial,  with leading Democrats on bills like McCain-Feingold and McCain-Kennedy, much to the dismay of his own party.  Governor Palin’s state checkbook is available to anyone in the country to view.  Sen Obama’s record is equally available but shows that he has enacted few if any bills and voted with his party over 95% of the time. 

The media seems to be struggling with the McCain/Palin ticket as well.  While some outlets have covered Obama’s “lipstick” remarks in passing,  most media outlets are concerning themselves with a game of “GOTCHA” when it comes to Sarah Palin’s record.  Every move or comment has been scrutinized in order to catch Palin and expose her flaws. 

On ABC’s Good Morning America, Brian Ross did a story about the controversy surrounding the Wasilla library.  It seems as Mayor, Sarah Palin asked the local librarian what she would do if the library was asked to remove books from it’s shelves, books that might be controversial.  The question was posed during a city council meeting and not in private, as some other reports might suggest.  The librarian was obviously against censorship and told the council this.  No books were ever removed nor was there ever a list of books to be removed as ABC did point out.  However, the ABC report left viewers wondering about this controversy and seemed to leave viewers with the impression that Palin wants to ban books. 

The piece also showed a pastor in the Assembly of God church giving a sermon this past week on homosexuals.  Brian Ross and ABC tied this sermon into the book controversy by highlighting 2 books, Go Ask Alice and Pastor,I’m Gay, as targets of the Palin inquiry.  Again, ABC left the impression that Palin is a member of this church.  The truth is that Sarah Palin is no longer a member of this church and has not been for almost 7 years.  Do they really want voters talking about crazy pastors again?