After the cascade of economic disasters that began in the housing markets in 2006 and spread into the financial markets in Wall Street and even overseas, people in the private sector pulled back. Banks stopped making so many risky loans. Home buyers began buying homes they could afford, instead of going out on a limb with “creative”– and risky– financing schemes to buy homes that were beyond their means.
But politicians went directly in the opposite direction. In the name of “rescuing” the housing market, Congress passed laws enabling the Federal Housing Administration to insure more and bigger risky loans– loans where there is less than a 4 percent down payment.
A recent news story told of three young men who chipped in a total of $33,000 to buy a home in San Francisco that cost nearly a million dollars. Why would a bank lend that kind of money to them on such a small down payment? Because the loan was insured by the Federal Housing Administration.
The bank wasn’t taking any risk. If the three guys defaulted, the bank could always collect the money from the Federal Housing Administration. The only risk was to the taxpayers.
Does the Federal Housing Administration have unlimited money to bail out bad loans? Actually there have been so many defaults that the FHA’s own reserves have dropped below where they are supposed to be. But not to worry. There will always be taxpayers, not to mention future generations to pay off the national debt.
Very few people are likely to connect the dots back to those members of Congress who voted for bigger mortgage guarantees and bailouts by the FHA. So the Congressmen’s and the bureaucrats’ jobs are safe, even if millions of other people’s jobs are not.
Congressman Barney Frank is not about to cut back on risky mortgage loan guarantees by the FHA. He recently announced that he plans to introduce legislation to raise the limit on FHA loan guarantees even more.
Congressman Frank will make himself popular with people who get those loans and with banks that make these high-risk loans where they can pocket the profits and pass the risk on to the FHA.
So long as the taxpayers don’t understand that all this political generosity and compassion are at their expense, Barney Frank is an odds-on favorite to get re-elected. The man is not stupid.
Can you guess which political party Barney Frank represents?
ANNOUNCER: We will now take you live to Beijing for the joint press conference already underway between U.S. President Obama and Chinese President Hu Jintao.
OBAMA: As I already said privately, I would like to thank President Jintao for his kind welcome and generous hospitality, and I hope that during this visit we can have a productive dialogue about the serious issues of concern that remain between our two countries — issues ranging from the unfair valuation of your currency to the trade imbalance, and most importantly, human rights. I believe there can be a great partnership between us but it will require compromise and understanding.
(Hu Jintao “speaks.”)
INTERPRETER: Thank you, Mr. President. I would like to add that I completely understand why you feel entitled to come here and lecture China on our shortcomings. After all, my country does owe the United States a great deal of money. Oh, wait. Hold on a moment. I believe I had that backwards. In fact, now that I think about it, it is your country that owes us a large sum of money. Is this correct?
OBAMA: Uh… yes.
(Hu Jintao “speaks.”)
INTERPRETER: Now, it’s coming back to me. I believe it’s $800 billion.
OBAMA: That is correct.
(Hu Jintao “speaks.”)
INTERPRETER: Such a large sum.
OBAMA: Yes, it is.
(Hu Jintao “speaks.”)
INTERPRETER: And yet you haven’t even mentioned it. That’s so odd.
OBAMA: Uh, look, you’re going to get your money.
(Hu Jintao “speaks.”)
INTERPRETER: Are we? Are we going to get our money? Because from what I read your country is in the middle of a serious recession.
OBAMA: Uh, while this is true, there are signs that our bailout has steadied the financial markets and our stimulus package has been effective in fixing the job crisis.
(Hu Jintao “speaks.”)
INTERPRETER: I’m curious. How many jobs has it created?
OBAMA: Uh, so far, none.
(Hu Jintao “speaks.”)
INTERPRETER: I see.
OBAMA: But our health care reform plan, we’re confident, is going to lead to enormous savings.
(Hu Jintao “speaks.”)
INTERPRETER: How exactly is extending health care coverage to 30 million people going to save you money?
OBAMA: I… don’t know.
(Hu Jintao “speaks.”)
INTERPRETER: And this “Cash for Clunkers” program– I have read that you purchased many clunkers with our money.
OBAMA: Yes, we have.
(Hu Jintao “speaks.”)
INTERPRETER: What does this word “clunkers” mean?
(Hu Jintao “speaks.”)
OBAMA: Well, a clunker is a car…
(Hu Jintao “speaks.”)
INTERPRETER: I know what a clunker is. And just so there is no misunderstanding, you are not allowed to pay us back in clunkers.
OBAMA:Of course not.
(Hu Jintao “speaks.”)
INTERPRETER: You know, as I listen to you, I am noticing that each of your plans to save money involves spending even more money. This does not inspire confidence.
OBAMA: I assure you, you’re going to get your money.
(Hu Jintao “speaks.”)
INTERPRETER: Will you kiss me?
OBAMA: Sorry?
(Hu Jintao “speaks.”)
INTERPRETER: Will you kiss me?
OBAMA: I don’t understand.
(Hu Jintao “speaks.”)
INTERPRETER: I like to be kissed, (shouts) when someone is doing sex to me!
OBAMA: There’s no need for that.
(Hu Jintao “speaks.”)
INTERPRETER: No? You know how many uninsured we have in China? One and a quarter billion, billion. But I’ll tell you this: We don’t owe anyone $800 billion.
OBAMA: Well, obviously, we take our debt to you very seriously.
(Hu Jintao “speaks.”)
INTERPRETER: I suppose if I really wanted to get my money I could call and say I was a Wall Street banker who needs his bonus. But really, why should I have to stoop to that level?
OBAMA: You don’t have to stoop to any level.
(Hu Jintao “speaks.”)
INTERPRETER: Please understand if it were my $800 billion I wouldn’t care, but it belongs to my country. I feel like I should bring it up.
OBAMA: You’re going to get your money.
(Hu Jintao “speaks.”)
INTERPRETER: Say, while you’re here, are you at least going to treat me to dinner and a movie?
OBAMA: I’m sorry?
(Hu Jintao “speaks.”)
INTERPRETER: I think it’s the polite thing to do, (shouts) before doing sex to me!
OBAMA: Mr. President, please.
(Hu Jintao “speaks.”)
INTERPRETER: Very well.
OBAMA: I assure you that as soon we solve this economic crisis…
(Hu Jintao “speaks.”)
INTERPRETER: Which one? The one that your country’s reckless real estate speculation caused? That one? I just want to make sure I know which one we’re talking about.
OBAMA: We are taking steps to make sure that what happened will never happen again.
(Hu Jintao “speaks.”)
INTERPRETER: What steps?
OBAMA: Uh, reform of banking regulations.
(Hu Jintao “speaks.”)
INTERPRETER: Do I look like Mrs. Obama?
OBAMA: What?
(Hu Jintao “speaks.”)
INTERPRETER: Do I look like Mrs. Obama?
OBAMA: Of course not.
(Hu Jintao “speaks.”)
INTERPRETER: Then why are you trying to (shouts) do sex to me like I was Mrs. Obama?
OBAMA: Now, now.
(Hu Jintao “speaks.”)
INTERPRETER: Just do it. Get it over with.
OBAMA: Mr. President!
(Hu Jintao “speaks.”)
INTERPRETER: Don’t be a tease.
OBAMA: I just…
(Hu Jintao “speaks.”)
INTERPRETER: I can take it.
OBAMA: This is not the time or place.
(Hu Jintao “speaks.”)
INTERPRETER: Very well. In that case, I call this press conference to a close, and Live from New York, it’s Saturday Night!
WINTERY KNIGHT 