There are a couple of things that you should know about if you have a queezy, “What-in-the-hell-are-these-idiots-doing-now?” feeling in the pit of your stomach about the so-called “second leg of the economic stool” (the mortgage rescue plan).
The first features CNBC financial reporter Rick Santelli’s self-described “rant” over his anger and rejection of Obama’s mortgage bailout. As Larry Kudlow notes, Santelli said:
Reporting from the Chicago commodity pits, my CNBC colleague Rick Santelli unleashed a torrent of criticism against this scheme. Santelli said: “Government is promoting bad behavior. . . . Do we really want to subsidize the losers’ mortgages? This is America! How many of you people want to pay for your neighbor’s mortgage? President Obama, are you listening? How about we all stop paying our mortgages! It’s a moral hazard.”
All this took place on the air, to the cheers of traders. Santelli called for a new tea party in support of capitalism. He’s right.
And you’re dang right, he’s right.
It’s being called “the rant of the year.” YOUTUBE
The White House immediately lashed out at Rick Santelli, but it’s pretty clear who won and who lost. CNBC is standing behind their guy all the way. His rant struck a nerve with Americans. As Newsweek‘s Mary Kate Carey puts it, “Their sense of injustice is real, and could be of biblical proportions.”
A Rasmussen poll shows an overwhelming majority of Americans agree with Rick Santelli and oppose Obama’s housing plan.
The second comes from a Bloomberg article, which provides a little more of the grounds behind Santelli’s “rant”:
By Jody Shenn
Feb. 20 (Bloomberg) — The Obama administration’s mortgage- modification plan offers the most aid to homeowners who “really stretched to buy their house and lied the most about their income,” Amherst Securities Group LP analysts said.
The plan calls for government payments before and after loans are reworked to mortgage servicers and lenders including mortgage-securities investors, as well as borrowers, Amherst’s Laurie Goodman and Roger Ashworth wrote in a report today. The proposal also will “badly misalign” the incentives of servicers and bondholders, they wrote.
“This program needs to be retooled,” the New York-based mortgage-bond analysts wrote. Amherst is a securities firm specializing in trading and advising investors on home-loan debt.
Under Obama’s plan, a borrower who qualified for a 6 percent interest-only “stated income” loan of $250,000 by claiming income of $45,000 a year while actually making $37,500 would see payments cut by $2,625 annually through lender and government subsidies, according to their report. A borrower who actually made $30,000 while claiming to make $45,000 would pay $5,700 less a year to meet the debt-to-income ratios sought.
“The borrowers that really stretched to buy their house and lied the most about their income receive the largest break in payments,” the analysts wrote.
Even Obama’s own numbers don’t add up in this horrible plan for economists trying to make sense of the White House’s data.
Dodd endorsed the $275 billion housing plan Obama unveiled this week, which is aimed at keeping as many as 9 million borrowers from losing their homes. He acknowledged the “moral hazard” of helping borrowers who made bad decisions, and said relief is needed because foreclosures drive down home values in neighborhoods.
“Moral hazard,” defined as the following:
Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.
In other words, let’s not learn our lesson. Let’s subsidize the behavior of the worst players – ALL OVER AGAIN – so they’ll be able to do the same damn thing all over again. And then the government will swoop in and “rescue” them all over again. And probably again after that. Because when you grow government so that it has power and influence over everything, you will always have a “connected” class who will use their influence to obtain special status, benefits, and favors from government. And the bigger the government, the bigger the abuse and corruption.
Along with Rick Santelli and a lot of other Americans, I’m ranting, too. I’m ready for some “tea party” action myself. I take walks in my neighborhood on a regular basis. And I’ve been doing so for several years now. And by simple observation, I can tell you that a whopping load of the homeowners who are in the most trouble today are the ones who took second mortgages so they could use their homes as piggy banks to buy lots of goodies that I don’t have (motor homes, swimming pools, fancy new cars, jet skis, quads, golf carts, etc.). Or they bought their homes on adjustable rate mortgages because they counted on cashing in on the appreciation in value before the higher interest rates kicked in (in other words, they gambled like high rollers at the crap table in Vegas). Or they were your typical “flippers” buying houses just to take advantage of the swelling real estate balloon so they could turn around and sell them at an obscene profit. Or they just stupidly overextended themselves by buying a lot more “house” than they could realistically afford.
In every single case above, the moment the dramatically overvalued real estate market corrected, they were dead ducks.
As further proof that this “crisis” was largely the result of real estate speculation, the lion’s share of the “crisis” is occurring in just five states: California, Florida, Arizona, Nevada, and Illinois. And those five states match the states with the biggest speculation bubbles.
I didn’t do any of that stuff. I thought I was being smart, not taking stupid risks. But it turns out that I was being dumb. Because now I and all the other “smart” people am going to have to bail out all the big-time gamblers. The banks will be pressured to refinance their homes at lower rates, to lower the principle, etc. so these people can stay in their homes. And the government will be underwriting the cost of new buyers to encourage them to buy new homes. But no one is going to give me any such sweetheart deals. Someone has to be stuck holding the bag in this kind of system. And those “someones” are people like me.
Let me tell you something: I deserve my money a helluva lot more than they deserve my money.
Rick Santelli isn’t the only one who’s raining all over Obama’s parade. MSNBC “Hardball” host Chris Matthews – who is so uber-liberal that he literally confesses to getting a shiver down his leg in the presence of Obama – somehow couldn’t manage to find a single financial expert to lend support to Obama’s economic plan. Both CNBC‘s “Mad Money” host Jim Cramer and Maryland University economist Peter Morici basically damned Obama’s plan in every way possible. They damned Obama’s fearmongering; they damned his stimulus package; they damned his housing package; they damned his bank bailout deal; and they damned his Treasury Secretary, calling for his ouster. And this from one of the most unrelentingly liberal programs on the most unrelentingly liberal networks on television.
We’re currently on the “second leg of the stool” of Obama’s economic plan now (first the so-called “stimulus” which is actually a pork-laden liberal social spending bill that will ultimately cost taxpayers $3.27 trillion), and now the greed, fraud and stupidity-rewarding mortgage bailout. The finance/banking bailout to come is expected to cost somewhere in the ball park of another $2 trillion, and will be intended to force banks to make loans they don’t want to make.
When liberal politicians decreed that home ownership was a “fundamental right,” banks didn’t run out and say, “Shoot, yeah! We’ll make risky loans! Can’t pay us back? No collateral? Can’t make a down payment? No problem!” They were forced to make these home loans by people like our new President.
And then Government Sponsored Enterprises Fannie and Freddie took all these bad “landmine” loans – these loans that didn’t have any down payment, these ARMs, these subprime mortgages – and bundled them together along with all the solid, stable mortgages in order to effectively subsidize the bad loans by mixing them up together with all the good ones.
And now the Obama administration wants what Yogi Berra called “deja vu all over again.”
Joe the Plumber famously said, “That sounds a lot like socialsim” during the campaign. And apparently that’s what Americans wanted, because – as Newsweek trumpeted – “We are all socialists now.” But socialism doesn’t work.
Margaret Thatcher put it this way: “The problem with socialism is that you eventually run out of other people’s money.”
Winston Churchill – who saw the failure of socialism firsthand – was even more damning: “Socialism is a philosophy of FAILURE, the creed of IGNORANCE, the gospel of ENVY; it’s inherent virtue is the equal sharing of MISERY.”
And Dr. Adrian Rogers explained why socialism – offered as the means to create “fairness” – is actually quintessentially unfair:
You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving.
The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.
We are diving deep into the cesspool of socialism. Many Democrats are assuring us that it will be only temporary, that we will get out of our current economic downturn and immediately restore the glories of capitalism – the system that allowed this country to become the most powerful economy in the history of the world – once again.
I don’t see it.
I see this nation now plunging blindly into a system that will be virtually impossible to free ourselves from as government – like a giant octupus – wraps its omnipotent tentacles into every fabric of society.
Right now the government is beginning to implement socialism by increasingly taking over the commanding heights of the economy – the banks, the manufacturers – and at the same time increasing political control over much of the rest of the economy by legislative fiat.
And once we’re in a socialist state, it’s hard to understand how we’ll get out. Particularly with Democrats – who have always pushed for more government control – in total control of the White House, the Senate, and the House of Representatives.
When we consider the interest to pay for the $787 billion “stimulus” package, and when we add in the cost of just some of those programs which are called “temporary” but which we KNOW will become permanent, (did I mention this?) the actual cost of the bill soars to $3.27 trillion. And yet, amazing as it is to believe, Obama is apparently following up one useless socialist spending bill with another. “Porkulus 2.0” may be on it’s way through the House of Representatives (or – as it really should be known – “Nancy’s house”) as early as next week.
So get used to subsidizing bad behaviors. That’s really the hallmark of the socialist system, after all.