[dmclone]

Bush administration threatens veto of 4 bln usd federal home buying program



WASHINGTON, Feb. 26, 2008 (Thomson Financial delivered by Newstex) -- The Bush administration warned today that it would veto a bill sponsored by Senate Democrats aimed at creating a new 4 bln usd fund that would help state and local governments buy abandoned and foreclosed homes.

'In addition to being extremely costly, this new program would constitute a bailout for lenders and speculators, while doing little to help struggling homeowners,' the White House said in a statement of administration policy released today.

'If S. 2636 were presented to the President, his senior advisors would recommend he veto the bill,' the statement said, referring to the bill introduced by Senate Majority Leader Harry Reid of Nevada.

The proposal would also triple the funding for the Neighborhood Reinvestment Corporation, but the White House said the NRC has already seen a healthy funding increase this year.

The White House statement reiterated that officials also oppose language that would give bankruptcy judges the power to modify the terms of mortgages for debtors in bankruptcy proceedings.

Rather than pursue these choices, the White House said Congress should quickly work to approve legislation that would modify the Federal Housing Administration to allow more homeowners to refinance their mortgages, and strengthen the regulator of Fannie Mae (NYSE:FNM) and Freddie Mac. (NYSE:FRE)

'These bills have bipartisan support and are the appropriate next steps to address the housing downturn; Congress needs to make these important bills an immediate priority,' the statement said.

[cycloneworld]

Please veto it. Please. A government program bailing out banks/lenders for giving people too much money to buy a house they couldn't afford? No thanks.

[dmclone]

There better not be one Republican sign this bill or I'll puke.

[cycloneworld]

Originally Posted by dmclone

There better not be one Republican sign this bill or I'll puke.

Get your puke bucket out.

'These bills have bipartisan support and are the appropriate next steps to address the housing downturn; Congress needs to make these important bills an immediate priority,' the statement said.

It's sickening. Our government is so reactionary instead of being proactive it is pathetic.

[Cy Heavy]

I'd be disappointed to see a Republican support legislation that would bailout financial institutions. Of course I also felt that about the savings and loan disaster that cost taxpayers over $100bln and was similarly disappointed at their bailout.

I supose, if Charles Keating was lining my pockets-Senator McCain-I'd try to help him out as well...

[cycloneworld]

My question: Why does Congress think they should bail out companies who made very bad business decisions and then want to limit profit from companies for making too much money??

Socialism anyone?

[Phaedrus]

Not to defend them, but you DO realize congress was threatening to take legislative action against those same lenders for "redlining" bad loan recipients just a few years ago. And that the bulwark for G.W. Bush's plan, which he bragged about repeatedly, was to increase home ownership among people who couldn't get loans before, right?

It's still a matter of "some people get what they sign up for" but congress was up to their elbows in pressuring lenders to make bad loans.

[cycloneworld]

Originally Posted by Phaedrus

Not to defend them, but you DO realize congress was threatening to take legislative action against those same lenders for "redlining" bad loan recipients just a few years ago. And that the bulwark for G.W. Bush's plan, which he bragged about repeatedly, was to increase home ownership among people who couldn't get loans before, right?

It's still a matter of "some people get what they sign up for" but congress was up to their elbows in pressuring lenders to make bad loans.

My position is that Congress shouldn't have been involved then either.

[alaskaguy]

Originally Posted by Cy Heavy

I'd be disappointed to see a Republican support legislation that would bailout financial institutions. Of course I also felt that about the savings and loan disaster that cost taxpayers over $100bln and was similarly disappointed at their bailout.

I supose, if Charles Keating was lining my pockets-Senator McCain-I'd try to help him out as well...

The savings and loan disaster did not bailout savings and loans. The government funding allowed the government to close S & Ls, liquidate the troubled assets of failed S & Ls, and payoff depositors that had their accounts insured by the FSLIC (Federal Savings and Loan Insurance Corp.). Had there not been a bail-out the FSLIC would have been bankrupted and their would have been lawsuits as to whether the FSLIC carried the implicit backing of the federal government.

Personally I do not support the federal insurance program (FDIC)that insures customer deposits. There are a number of reasons that I do not support the concept. The main reason I do not support the FDIC is that there are options for people to invest their savings in that are relatively "risk free" (primarily money market funds that are marketed by the mutual fund industry).

A recent opin in the Wall Street Journal does an admirable job of expressing my sentiments on both the S & L bailout and the current housing crisis:

Business World - WSJ.com

[Phaedrus]

Originally Posted by cycloneworld

My position is that Congress shouldn't have been involved then either.

I agree, completely. So, all are guilty in this mess.

Let the market play its course. Quit trying to fiddle with it, is what I say.

[alaskaguy]

Originally Posted by Phaedrus

Not to defend them, but you DO realize congress was threatening to take legislative action against those same lenders for "redlining" bad loan recipients just a few years ago. And that the bulwark for G.W. Bush's plan, which he bragged about repeatedly, was to increase home ownership among people who couldn't get loans before, right?

It's still a matter of "some people get what they sign up for" but congress was up to their elbows in pressuring lenders to make bad loans.

The federal government under GW Bush has indeed pushed the American dream (homeownership) on people that historically had been excluded. The federal progams that push these programs are "marketed" by USDA -Rural Development and subsidize the interest rates as low as 1%. Subdizing the interest rate allows very low income households to purchase housing. The credit requirements are every bit as strict as for conventional financing. The "subprime" market allowed people with far less than perfect credit to purchase housing but was marketed by private industry.

In defense of the government subsidizing low income households, the alternative had been subsidizing developers to construct low income rental housing and subsidizing the rental payments. There are a number of studies that conclude that subdizing home purchases was a much less costly program than subsidizing rental housing.

[Phaedrus]

I stand corrected on that point, then.

[jdoggivjc]

Originally Posted by alaskaguy

Personally I do not support the federal insurance program (FDIC)that insures customer deposits. There are a number of reasons that I do not support the concept. The main reason I do not support the FDIC is that there are options for people to invest their savings in that are relatively "risk free" (primarily money market funds that are marketed by the mutual fund industry).

The FDIC is there in order to prevent the mad rush on banks to withdraw their deposits when account holders begin getting nervous about the economy and "want their money now." Banks are only required to hold a % (I think it's 10%) of the total deposits at the bank, and then loan out the rest. If a rush on the bank occurred, there is no way the bank can pay all their customers their money, because quite frankly, they don't have it. What's worse, rushing the bank leads basically drains the M2 monetary supply and leads straight to a depression (the last 4 were preceded by rushes on banks).

The FDIC isn't necessarily there as much to protect banking customers who deposit their money in the bank as much as it is there to protect the US economy from a depression. Basically all it does is ensure that if something happens to the US economy the US guarantees that each customer will get up to $100,000 of their deposits back. Essentially, the FDIC is the Government's way of telling banking customers, "hey, we know you're nervous about the economy, but don't make things worse by panicking and rushing the bank. We have your back and you will get your money back. Just be patient."

Consequently, there hasn't been a serious rush on banks nor a depression for that matter since the FDIC was instituted after the Great Depression.

[alaskaguy]

I fully understand the premise behind the FDIC. Initially when it was created, it may have had a place but I do not believe that continues to be the case. There are alternatives for people to save and invest their money. In addition, there are sources of funding other than FDIC insured banks that infuse capital into the economy. The banking industry although important, does not have anywhere near the significance that it did forty years ago in this country and its significance drops every year. Finally, the Federal Reserve is the "lender of last resort" and stands ready to lend to well capitalized banks to protect them from depositor runs.

[alaskaguy]

An alternative to the current FDIC system is explored at the following website:
Reforming Deposit Insurance: The Case to Replace FDIC Protection with Self-Insurance