It's a shame that the Democratic-controlled Illinois legislature had passed on an opportunity to mandate a special election, no doubt fearing that a voter backlash against the former governor's corruption charges could propel a Republican to the seat. It appears, though, as if Burris is beginning to buckle under the ongoing political pressure, as new Illinois Governor Quinn is calling on him to resign and the Senate Democrats and the President are distancing themselves. The Illinois GOP, having suffered heavy casualties in the aftermath of the George Ryan scandal, understandably want to hold Burris' feet to the fire. Personally, I disagree with Roland Burris' liberal views, but I consider him a legitimate and honorable successor to Barack Obama in the Senate. Roland Burris has established his own record and viewpoints and should be judged on his Senate performance. I find it unseemly that his public service career should come to an end as a scapegoat for Blagojevich's sins; there was no quid pro quo. Illinois has serious funding issues and other problems; it's time that the political parties let go of this obsession with Blago. I suspect Burris realizes that his reelection to the Senate next year would be an uphill battle
Obama's Home Mortgage "Solution"
Obama has this irritating tendency to pay lip service to what he regards as the principal opposing arguments to proposed legislation and then argue that these objections really aren't applicable. The devil is in the details, and once again, you have to pay attention not to what Obama says but what he does.
There are multiple ways to evaluate the proposed legislation, but let me provide some relevant context. Obama wants you to think that none of this money is going to be used to shore up irresponsible homeowners whom bought houses too big for their budget, with gimmick interest terms that assumed historically low rates would continue (but would reset if they rose) and that housing prices in a bubble would hold indefinitely.
The point is that the Democrats are partially responsible for mess because there was political pressure for lenders to underwrite loans to lower-income households without a conventional 20% down payment. The end result was more competition on the housing market, pushing up prices. It was like a game of musical chairs where all the players were confident they would cash out before the bubble burst. There is no doubt that lenders were irresponsible when they didn't even verify income, and no doubt some brokers wanted to cash out for short-term profits, not worried about loan defaults down the line.
The Wall Street Journal printed an opinion last Wednesday entitled "The Dukes of Moral Hazard". The gist of the article is that the federal government under Obama's plan is planning to subsidize certain homebuyers whom bought into the peak of the housing market, while today's renters, whom responsibly saved during the bubble towards the conventional down payment, won't see a penny. Second, the Journal argues that a significant percentage of homeowners eligible to receive assistance will default anyway, essentially throwing good taxpayer money after bad. Third, the Journal suggests that Obama and his cronies are intentionally downplaying the legislation's long-term costs. The basic argument is that Obama is simply postponing the day of reckoning and should let the market find its way to the bottom and stabilize. That, of course, means foreclosures.
The usual suspects came out on the Sunday morning talk shows, implicitly threatening existing homeowners they should support the legislation, because foreclosures in their neighborhoods will have an adverse effect on their own equity. Of course, at the same time they're arguing they aren't going to temporarily rescue homebuyers whom lied about their sources of income, etc.; let's get this straight: foreclosures are foreclosures. Whatever the good faith intentions of the homebuyer, you are still going to get a negative impact; as a neighboring homeowner, I was not party to the mortgage contract. If you are a homeowner in good faith, you should not be unduly influenced by occasional market corrections during the life of, say, a 30-year loan. These scare tactics are morally reprehensible. I'm getting sick and tired of Obamaians trying to manipulate voters by talking down the economy or the housing market and trying to impede full and honest debate of ill-considered, immature legislation, like the recent "stimulus" bill which places the burden of government politically popular socialistic giveaways on the backs of our children and grandchildren. It is critical that the Congress quash this poorly-conceived initiative which de facto calls for American families paying off their mortgages responsibly or renters saving towards their down payment to subsidize the mortgages of their less responsible neighbors.
Say 'No' to Cramdowns
You would think that Obama should be able to read the writing on the stock market scoreboard: Every time he opens his mouth, the market seems to have an allergic reaction. For example, during his first press conference Obama unduly hyped and raised false expectations regarding the following day's presentation of Treasury Secretary Tim Geithner. The market did not perceive the Geithner plan as adequately fleshed out and quickly tanked. If that wasn't bad enough, the rumors about nationalizing banks and enabling cramdowns on mortgages are decimating stocks in the financial services sector, with bellwether Citibank's stock reduced to a penny stock (under $2 a share).
Bankruptcy judges will assure you that they are up to the task of converting paper losses on mortgages into real ones for banks, wiping out their capital. They will tell you that they are doing this for the benefit of the banks (bless the judges' hearts!) because now the banks won't have to go through the out-of-pocket costs associated with eviction. After all, judges already can cramdown other types of loans (e.g., auto): why should home mortgages be any different?
Well, how about this, judges? What about the principle that you don't change the rules in the middle of the game when lenders priced in a rate not taking into account the risk of cramdowns? What do you think the fact of cramdowns is going to mean to prospective homeowners in the markets? What about moral hazards? If my neighbor acted irresponsibly and got rewarded with a writedown of his housing principal, why am I the sucker paying off a mortgage living up to my terms of the mortgage loan despite suffering similar paper losses on my equity position?
I'm sick and tired of Obama cherrypicking his targets. Many, if not most of us, suffered massive corrections in our investment accounts last year; there's a current news story about a 90-year-old man being forced back to work at $10/hour because of investment Ponzi schemes (Madoff et al.); and many former Enron employees lost their retirement savings. We all realize that the market doesn't always go up and there is a risk of loss. None of these things involved factors within our control. But judges want the power to write down mortgages, knowing that all homeowners are aware that property values can fluctuate during the term of the loan.
Let me make it clear that I am sympathetic to the fact that families whom can't pay their mortgages face a very real problem of eviction, and I don't wish that on anyone. What I think we should look at is more flexible means of refinancing loans (e.g., extending the term of the loan) and if cramdowns do occur, the homeowner should not profit from any future sale up to the amount of the cramdown.
Obama's Rebuke of LaHood's Proposal for Per-Mile Gas Tax
Former GOP Congressman and current Transportation Secretary Ray LaHood, looking for a long-term plan for meeting infrastructure operational costs (i.e., highways, bridges, etc.), has suggested moving towards a per-mile gas tax. LaHood's idea is hardly a new one, but that doesn't detract from its legitimacy. The basic question is the inherent fairness of taxes; is it fair for people with higher-mileage vehicles to be subsidized per mile by people owning older or less efficient autos? The fact is that hybrid/electric vehicles are unaffordable for many lower-income people, and there isn't enough production supply. How do we allocate the costs of infrastructure that owners of electric cars are also using but not contributing to because they are not consuming? This is all in step with Obama's notion of "spreading the wealth around": if you can give people who don't pay taxes a tax "rebate", why aren't owners of politically-correct vehicles entitled to have "the other guy" pay their own fair share of infrastructure operational costs? It's unconscionable, just like taxing tobacco users for some general purpose government program. It creates a perverse situation where you are dependent on people continuing to engage in unhealthy habits. Similarly, the continuing move towards more mileage-efficient vehicles simply postpones the day of reckoning when there aren't enough drivers of less-efficient vehicles to fully fund the costs of maintaining infrastructure.
The radical environmentalists, of course, oppose the concept of passing along operational costs on a more equitable basis because they fear that people who pay full list price (or above) for more fuel-efficient vehicles will be turned off by losing their tax break of maybe pennies a gallon when they fill up. Never mind the fact that the savings they receive from lower pretax fuel costs more than cover the amount of taxes they would pay under a more equitable arrangement.
Obama, of course, is tolerant of no dissent in furthering his heavily-subsidized green energy agenda, which he disingenuously portrays as being a source of economic and job growth--including doing away with a modest tax subsidy at the expense of owners of lower-mileage or older vehicles.
