YET ANOTHER IDIOTIC IDEA FINDS A HOME IN WASHINGTON, D.C.

2/14/08

This morning’s Wall Street Journal (2/14/08, page A2) reports that both Congress and the free market Bush administrations are considering a number of plans that “could shift some of the risk for troubled loans to the federal government.” Under especially intense scrutiny is a plan, advanced by Credit Suisse Group, which, purely by coincidence, one can be sure, is up to its neck in bad housing related securities, under which the FHA would guarantee loans originated in order to refinance home loans that have gone sour due to homeowners’ buying too much house and/or borrowing against their homes to finance lifestyles of which you and I, who will be put on the hook for these loans under this plan that intrigues the free market Bushmen, can only dream. I have commented on such “plans” before (most notably and recently in my 1/25/08 (in which I discussed plans to expand the size of the loans the FHA will be allowed to guarantee to, depending on the geographic location of the home being financed, anywhere from $625 thousand to $730 thousand) and 1/24/08 posts) and will continue to discuss them until they are summarily executed by right thinking legislators or, far more likely, come to fruition.

The Journal puts it very succinctly when it says

“The risk: If delinquent borrowers default on their refinanced loans, the federal government would have to absorb the loss.”

Succinctly, but not starkly. The “federal government” is not some amorphous mass dispensing favors and good tidings to the deserving and the well-heeled with a propensity to write campaign checks. The “federal government,” or at least the “federal government’s” finances, is you, or yours, respectively. So, under this plan that free market Bushman and Treasury Secretary Hank Paulson seems to think is the bee’s knees, puts you on the hook for mortgages that, in most cases, you wouldn’t even consider for yourself, due to their being out of the question given your income (little did you know how big a mortgage your income would support in the brave new world of Wall Street Whiz Kid finance, but that is another matter) or because you still retain a quaint sense of financial propriety.

The Journal goes on to report that

“Just a few months ago, such proposals would have been considered far-fetched, but these and other unorthodox ideas are gaining credibility.”

And why would that be? As I explained in earlier posts, two key Republican constituencies, the careless, witless, pompous, arrogant, and now hapless financial community and faux wealthy homeowners with a curious compulsion to display their Potemkin wealth, are in trouble, When these constituencies are in trouble, the GOP treats its rhetoric about respecting free markets and the private sector for what it is: dispensable cant designed to hornswoggle those who truly believe in such principles and who are sufficiently ingenuous to believe anything a politician, especially a Republican politician who never saw a public sector job s/he wouldn’t take, says. Essentially, the GOP’s worldview can be encapsulated as follows:

When the poor, or even the average working person, needs help from the government, the free market must be respected and allowed to perform its miracles. When the well off , the privileged, or even the financially frivolous who make a sometimes passable show of being well off or privileged need help due to their own idiocy and insecurity, the free market be damned—we have to DO SOMETHING!!!

Fortunately, there are still some GOP politicians who maintain a sense of propriety, or at least shame, sufficiently strong to shy away from such blatant hypocrisy. For example, Rep. Scott Garrett (R., NJ), when asked his views on the proposals of which the free market Bushmen are so enamored, responded “I would share the concern and nervousness about going in that direction.” Unfortunately, Mr. Garrett is something of a dinosaur in the new, enlightened, Bushite GOP, and he will doubtless be hearing from representatives of our free market President in the near future.

Predictably, the Democrats, led by Chuckie Schumer, have proposed an even more moronic program, involving the government’s even more aggressively buying up bad loans and thus putting the hook even further up taxpayers’….well, you get the idea. The Democrats, of course, disingenuously protest that their plan involves buying the bad loans at (politically determined) “discounts” and thus doesn’t bail out the financial industry, just homeowner who got in over their heads and are now looking for a handout from those on whom they normally look down their noses. Sorry! I, and surely the Democrats, meant to say “financially strapped homeowners.”