Tag Archives: TARP

News

Why the mortgage cramdown bill would hurt consumers

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The Democrats are pushing a “cramdown” bill which is a bill designed to allow federal judges to renegotiate the terms of delinquent mortgages when the person who entered into a contract to borrow the money cannot repay it. The problem with this bill is that it hurts the very people it is intended to help – because as soon as banks see that they cannot rely of the courts to enforce contracts, they will immediately stop making loans to those with mediocre credit ratings. So, the people who most need to borrow money will be the hardest hit. And it opens the door for the government to then seize control of the banks and force them to make the loans, so that we turn into Venezuela.

Consider this article from the Heritage Foundation:

Just as the housing market is showing definite signs that it is stabilizing after a lengthy drop in housing prices, the House of Representatives is about to vote on proposal that would destabilize it once again while also raising the cost of mortgages for future home buyers.

The proposal – to be offered by Rep. John Conyers (D-MI) as an amendment to the financial regulation bill now before the House -would allow bankruptcy judges to reduce the principal owed on a mortgage, a practice often referred to as a “cramdown.” Judges would also be able to reduce interest rates or lengthen the term of the mortgage.

This is a huge policy mistake that would help only a few people while raising the cost of borrowing for thousands of moderate-income and first-time homebuyers.

Fortunately the bill failed to pass, but it does show you the fatal flaw of Democrat emotion-based policy-making. They hurt the very people they are trying to help – the cause the very crisis they are trying to alleviate. That is standard operating procedure for Democrats. They don’t understand the incentives they are creating when they pass “compassionate” laws.

Democrat secures TARP funds for unemployed homeowners

On another subject, take a look at this AP article. (H/T Michelle Malkin)

Excerpt:

Call it the $6 billion boycott.

By boycotting a key House committee vote last week and threatening to abandon support for banking regulations, members of the Congressional Black Caucus got $4 billion added to a Wall Street regulation bill and $2 billion to a proposed House jobs bill in spending they sought for African American communities.

House Financial Services Committee Chairman Barney Frank, D-Mass., this week inserted $3 billion to the legislation to provide low-interest loans to unemployed homeowners in danger of foreclosure. He added $1 billion for neighborhood revitalization programs.

The money would come out of the $700 billion financial rescue fund.

“For those of us who walked out, it was absolutely essential that we have parts of that legislation directed toward helping people who have been left out of all of these bailouts,” Rep. Emanuel Cleaver, D-Mo., one of 10 black caucus members in the Financial Services Committee, said…Among the caucus’ demands were greater assistance for minority-owned auto dealerships and banks that lend in African-American communities and more government advertising in minority-owned media.

This is taking money out of the private sector, which creates jobs, and bailing out people who bought too much house. Taking money out of the private sector destroys economic growth. And that is why we have a 10% unemployment rate.

News

Democrats planning government regulation of more large companies

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Story from Investor’s Business Daily.  (H/T ECM)

Excerpt:

Washington is quietly preparing a hostile takeover of Wall Street with a new bill that would put regulators in control of managing asset prices.

While all eyes are fixed on the cobra poised to strike the health care industry, a python is wending its way through Hill banking panels that would squeeze the life from the whole economy.

By Christmas, House Financial Services Committee Chairman Barney Frank hopes to pass legislation that would create an uber-regulatory body called the Financial Services Oversight Council.

It would give the Treasury secretary power to pick which large finance firms are “systemically critical,” or too big to fail. He’d have the final call when the government steps in to save or unwind a troubled firm.

The bill would “essentially turn over control of the financial system to the government and seriously impair competition in all areas of finance,” says former Treasury official Peter J. Wallison. It would put the government permanently in the business of picking winners and losers, he adds, creating a kind of permanent TARP.

[…]The new regulatory agency can regulate banks, bank holding companies, insurance companies, hedge funds, finance companies and any other kind of company that might be designated too big to fail.

“The existence of these designated companies will impair competition in every market they are allowed to enter,” says Wallison, “and will force the consolidation of competitors so that markets become dominated by government-backed giants like themselves.”

Under the new regime, designated companies will not be able to finance their affiliates’ sales, putting them at a severe disadvantage against foreign competitors. GE Capital, for example, would not be able to finance GE sales of aircraft engines.

In effect, designated companies will fall under the control of the feds, unable to start new activities or enter new markets or perhaps even open new offices without federal approval. “This is a degree of political control of business that has never been attempted before,” Wallison says.

When government gets involved in business, business must turn around and direct money toward influencing politicians through political contributions. And that causes them to spend less money hiring workers and producing goods, unless they avoid the regulations completely by shipping their operations, and jobs, overseas. Democrats cause firms to outsource by interfering in the free market.

My previous post explained how government regulation of business caused the recession that Obama is prolonging right now.

Commentary

20 questions you won’t hear at Obama’s press conference tonight

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From Keith Hennessey. He groups the questions into 4 categories, so I’ll excerpt one from each category below. The press conference is scheduled for Wednesday at 8 PM Eastern time.

Economy:

You proposed spending money from the TARP to prevent foreclosures, help small businesses, and to buy toxic assets from banks.  In June CBO said they had found no evidence that any money has been spent for any of these programs.  How many foreclosures have been prevented, how many small businesses have received loans from, and how many toxic assets have been purchased?

Health care:

Your Administration has said that health care reform is the key to addressing our long-term budget problem.  Yet you have adopted a lower standard, that health care reform legislation simply does not make our deficit problems worse.  If health care reform leaves the unsustainable budget situation unchanged, and since CBO says your budget would result in nine trillion dollars of new debt over the next decade, then how else do you propose to deal with the projected explosion of government debt over the long run?

Global Warming:

Does it make sense for the U.S. to impose higher energy costs on American workers and manufacturers if the two largest developing economies [India and China] are unwilling to slow their emissions growth?  Won’t that just disadvantage American workers with little reduction in future global temperatures?

Trade:

The top Democrat and Republican on the Senate Finance Committee have called for you to submit to Congress for their approval the signed Free Trade Agreements with U.S. allies Colombia, Panama and South Korea.  Why have you not submitted them to Congress?  When will you do so?

These questions really expose how things have gone awry with the Obama presidency.