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Is Barack Obama going to forgive billions of dollars of Fannie and Freddie mortgages?

Even though this story was making the rounds five days ago, it's somewhat new to me. It seems rumors are flying that Barack Obama is preparing an August surprise that amounts to forgiving billions of Fannie and Freddie home mortgages that are under water. This explains why Obama lifted their bailout caps in April, which has allowed him to infuse the GSE's with all the taxpayer cash they need. As James Quinn notes, Fannie and Freddie have an unlimited appetite. They've eaten up $151 billion of taxpayer dollars so far, and they're not anywhere near being satiated.

If Barack Obama actually goes through with this scheme, it would be a blatant attempt at vote buying designed to minimize or possibly reverse the slaughter the Democrats are expecting at the ballot box in November, a shockingly unethical use of the American people's tax money.

The questions swirling around this rumor are obvious: 1) will Obama actually do it and 2) will it give the Democrats the boost they need to maintain control of the House and Senate?

James Pethokoukis has the details of this rumored mortgage forgiveness program:

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:

1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.

[...]

3) Keep in mind the political and economic context. The nascent recovery is already running out of steam. Wall Street economists just downgraded the government's second-quarter GDP estimate of 2.4 percent to around 1.7 percent. And as even Treasury Secretary Timothy Geithner is warning, the unemployment rate may well begin to rise back toward the politically toxic 10 percent level given such sluggish growth. Many in the White House thought the unemployment rate would be dropping sharply by this point in the recovery.

But that is not happening. What is happening is that the president's approval ratings are continuing to erode, as are Democratic election polls. Democrats are in real danger of losing the House and almost losing the Senate. The mortgage Hail Mary would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they -- and their children and their grandchildren -- would be paying for someone else's mortgage woes.


Of course the economy isn't recovering. The gargantuan spending programs the Democrats implemented are antithetical to economic growth. You can't shrink the private sector in an effort to grow the public sector and expect to have a thriving economy.  That they actually thought they would tells us how utterly ignorant they are on matters of economics.

Now, what about those Americans who will be forced to pay for these subsidized mortgages? How will they receive equal protection under this new government program?

The answer is that they won't.  Rather, they're being set up. Obama looks at the millions of Americans who were responsible and sees personal ATMs for all those voters who have upside down mortgages.  These folks will soon learn what it is like to be used as indentured servants who will have their taxes confiscated for the purpose of bailing out millions of other Americans, all for the Democrats' political benefit.

Alexis de Tocqueville once said, "the American Republic will endure, until politicians realize they can bribe the people with their own money."  Obama's Fannie and Freddie mortgage bailout, should it see the light of day, is exactly what he was talking about.

Cross-posted at KimPriestap


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Comments (15)

Let the Chief Doofus sign s... (Below threshold)
GarandFan:

Let the Chief Doofus sign such a law. It will help ONE out of FIVE. Guess what those other FOUR are going to do when it comes time to vote.

Wait till they find out tha... (Below threshold)
Jer:

Wait till they find out that any forgiven debt is added to their taxable income, in addition to turning a mortgage interest deduction into a tax.

Will cause a bigger defeat ... (Below threshold)
Michael:

Will cause a bigger defeat for the Dims.

Jer - Heh! I was thinking ... (Below threshold)

Jer - Heh! I was thinking the same thing. And wait 'till they get the bill for a cash payment of their annual homeowner's insurance premium.

I think it's worth remembering that the demographic most responsible for Barack Obama's election (that is, the group with the largest defection from (R) to (D) between the 2004 and 2008 elections) was white upper-middle class and upper class professionals. These are the charity-minded folks who "didn't mind paying a little more" in order for the poor to be better off, and the folks who hoped that a new administration could develop a more peaceful foreign policy in the wake of a long and costly war.

But now they are the ones who will bear the brunt of higher taxes after the expiration of the Bush tax rate reductions, and they are also the ones who will personally suffer the most as their businesses are pummeled by new regulations and taxes and subsidies. And when they find out that they will be paying for the mortgage bailout, they will be even more pissed.

Even if he tries to bribe lower income earners with a mortgage bailout, I just can't see this going well for Obama, because they are not the pivotal votes.

3-7-77Vigilance Comm... (Below threshold)

3-7-77
Vigilance Committees need to be formed.

As presently constituted - ... (Below threshold)
Jim Addison:

As presently constituted - WITHOUT the sort of new giveaway Kim reports here - Freddie Mac and Fannie Mae are bottomless pits with no effective limit on their liabilities who are buying up just the sort of "subprime" crap paper that precipitated the 2008 financial crisis.

These agencies just need to be shut down - along with the Departments of Education, Commerce, and Energy. For starters.

Be a deadbeat when it comes... (Below threshold)
JLawson:

Be a deadbeat when it comes to your mortgage - get a deal of a steal from the government.

Pay consistently on time, manage your money properly, and you get nothin'.

You know, there's something that's just not right with that picture...

Here's a case for tax credits. Give a person paying a mortgage a tax credit of twice the interest paid - regardless of their income level. So the rich get more - so what? They bought the house, putting folks to work building it, supplying the materials, making furniture and the like.

Want to create jobs? You don't make jobs by grabbing more money from the taxpayer, losing 15-30% of it to friction as it grinds through governmental bureaucracies, and then handing what's left of it out to unemployed people.

You can buy VOTES that way - but precious few jobs are going to be created.


If we only had an honest me... (Below threshold)
Hank:

If we only had an honest media, and if Obama would show some spine and hold a press conference, some one might ask him about this bill and what he said on Dec 21st, 2009.

"But as I've said, in the long run, we can't continue to spend as if deficits don't have consequences; as if waste doesn't matter; as if the hard-earned tax dollars of the American people can be treated like Monopoly money. That's what we've seen time and time again. Washington has been more concerned about the next election than the next generation."

Even his teleoprompter might have trouble answering that.

It's happening - but maybe ... (Below threshold)

It's happening - but maybe not how you expected. I just a few minutes ago received word that the U.S. Treasury is sending hundreds of millions of dollars to the states to pay for mortgage assistance. I'm trying to get the info now. Will post it as soon as I find it. This is money not even asked for, and maybe is coming from TARP or ARRA money that's been recaptured.

Here's the program:<p... (Below threshold)

Here's the program:

Five states already have it and we recieved word yesterday that we are getting funding here in my state.

http://www.financialstability.gov/latest/pr_08042010.html

I am sure that there won't ... (Below threshold)
Matt:

I am sure that there won't be blanket forgiveness of underwater Fannie/Freddie mortgages. There will be enough stipulations, exceptions etc that only select groups will be allowed to apply. I am also sure that the demographic that might benefit from such a giveaway might not be the most reliable voters anyhow. If this was a presidential election year, maybe, but not mid terms when most groups seem to be ready to go vote against someone rather than for them.

Politically speaking this i... (Below threshold)
Ceasar Augustus:

Politically speaking this is much ado about nothing. That's because the only people who are stupid enough to fall for this bait-and-switch already vote Democrat or don't vote at all.

Thee is a new program annou... (Below threshold)
Rick Caird:

Thee is a new program announced late today:

http://www.csmonitor.com/Money/new-economy/2010/0811/Unemployed-homeowners-to-get-extra-foreclosure-aid

The net is the government will loan up to $50K for 2 years, at zero interest, to unemployed homeowners. My take is that it is strange to loan $50K to someone who is unemployed. Even if that person does find a job tomorrow, will he be able to pay back 450K in two years? Probably not.

What a crazy bunch of typos... (Below threshold)
Rick Caird:

What a crazy bunch of typos. The last phrase should have been:

"will he be able to pay back $50k in two years"

If you feel that way, pleas... (Below threshold)
judy:

If you feel that way, please don't go search or google " bombshell barack " actually very sad indeed.

:o(




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