Analysis Of “The McCain Housing Plan”

I will start off by saying that I think that McCain is on the right track with this one.  This is the best proposal I have heard thus far (other than what the Fed is doing currently with commercial paper) to solve the economic crisis America faces.

First, a bit of an explanation of the root problem…  and I am going to simplify as much as possible, talking about the major themes (and ignore important but smaller ones…)

The fundamental cause of the problems with the banks and the economy as a whole originate in the housing crisis.

The housing bubble led to greater and greater numbers of risky loans and exploded when Fannie Mae and Freddie Mac started acting much like a hedge fund and invested in the very paper they were insuring.  This led to an explosion in the market and decreasing underwriting standards, especially when Fannie Mae and Freddie Mac made the “Alt A” programs available. 

The banks began to group these loans (aka bank debt) together into packages and sell them off to other banks.  The bank that bought them took these packages of loans  and divided them into “risk tiers” and sold those tiers as derivatives.  These banks then grouped the derivatives together and divided them further, until the original group was chopped into so many loans it was impossible to tell what was where.

This, in theory, should have minimized the risk associated with the loans.

Because of the grouping and dividing and selling and grouping and dividing and selling, virtually all the banks were heavily invested in these MBSs (mortgage backed security) and CDO’s (collateralized debt obligation.)

Then the economy slowed…  and housing was the one beacon of light in a dimming economy, so the banks, hedge funds, investors, and consumers invested even more heavily in real estate.

As time went on, the banks began to discover that a much larger than expected percentage of the loans were given to people that should not have gotten them.  The bulk of these “bad loans” were found in the Alt A realm that banks would not have normally invested as heavily in, but for the actions and rules of Fannie and Freddie.

With the economy continuing to slow, eventually the housing sector peaked and the dam broke. 

Foreclosures began to happen at an epidemic rate because the people that should not have been in the loans they were given couldn’t pay.

So the banks/hedge funds and especially Fannie/Freddie realized that they should not have been offering all these loans tightened up their lending standards because they couldn’t continue to offer the crap loans they had been offering, which would have made the hole they were in that much deeper.

The side effect of this was that, especially in a slowing economy, fewer and fewer people could qualify for new loans to buy all the houses that were pouring on to the market from new construction projects (at an all time high) and from massive foreclosures.

The housing market glutted, the banks began to dump the foreclosures for next to nothing and all the other houses sat on the market for a year or more. 

With only the foreclosures selling, they were the only sales to peg the prices of houses against and property values started dropping like crazy, especially in places where the bubble was biggest…  CA, FL, NV.

This has caused the secondary crisis…  there are millions upon millions of people upside down on their houses right now.  Millions.

So because of the problems with 10-15% of the loans, and the foreclosures they led to, the values of the houses with credit worthy people now had problematic loans because their property was worth less than the mortgage was for.

Essentially, the banks no longer knew what any of their loans were worth, because the assets tied to the loan weren’t worth enough to cover the outstanding debts, increasing the balance sheet debts of the banks by billions and billions and billions of dollars.

This made the banks “uncreditworthy” and so they stopped loaning money to eachother, leading to near of total collapse of a huge number of banks.

So, in order to solve the valuation problem, keep people in their homes and prevent more foreclosures, and to prop up the prices of homes as much as possible, earlier this year, the Congress approved a program called the “FHA Secure.” 

This program basically works like this…  if you have a $300,000 loan and your house is only worth $225,000 now, if the bank will lower the balance to the $225,000 then the FHA will insure the loan, making the loan more immediately marketable.

The bill and the program went into effect October 1. 

Not a single bank has implemented this plan to date.

The problem is two fold; 

First, it is voluntary…  the banks don’t have to do it.

Second, it requires that the banks take HUGE writedowns and though it may help even out the bottom line in the long run, in the short term those HUGE writedowns would probably kill them at this point…  especially perceptually.

Nobody wants that.

Ok, so now that we are caught up to present times, we can talk about McCain’s housing plan.

John McCain has basically taken the FHA Secure program, and instead of making the banks take the writedowns and essentially forfeit hundreds of billions of dollars…  McCain wants to re-allocate the “Bailout” money to buy out the negative equity on these people’s houses.

Why is this great?

1.  The estimated cost, about $300 Billion…  A number that is less than half of the “Bailout” which only helps banks/Wall Street and does nothing directly for mainstreet.

2.  It keeps people in their homes, reducing their balances and their payments.

3.  It helps prop up housing prices, or at least stabilize them, because it will lead to fewer foreclosures.

4.  It bails out the consumer and the banks in one fell swoop. 

Helps the folks, helps the banks.  Bingo.  I think he has something right there!

Read more here

Brilliant.

As I said, this is the best idea to solve the crisis I have heard so far (other than the fed buying commercial paper… also brilliant.)

 

(and yes, it’s basically Hillary Clinton’s plan, but don’t tell the Republicans LOL)

The Presidential Debate, The Sequel.

Well, this time around was much better for McCain than the first. 

What most people don’t know is that McCain immediately broke one of the rules of the debate by walking more than 3 feet from his stool, right over to a concerned citizen to talk directly to him.

Why?

Because McCain cared. 

McCain walked right over to the guy, looked him in the eye and gave him the classic McCain “Straight Talk.”

Also, McCain landed quite a few heavy blows, with very little as far as a response from Obama…  just obfusification, especially on the question of Fannie Mae, Freddie Mac when McCain charged Obama and his “cronies” for blocking his legislation to reform the two GSE’s. 

Obama’s only response to the five or six sentence explanation that McCain gave showing how Obama and his buddies were tied into the housing crisis…  “I never promoted Fannie Mae…” and then he moved on.  That was his only response! 

Weak.

McCain clearly won this debate, but he missed the jugular.  He didn’t land the knock out punch he really needs.  So in a way, because Obama survived the match still standing, he wins a little too.

The polls will probably show an uptick of a point, maybe two, for McCain because of the debate, but not much more than that.

The real impact on how people are going to vote is probably going to result from the pitbull Sarahcuda and her attacks, which will drive Obama’s negatives up.  These results are already showing up in the polls, as can be seen in this group of four quoted in the American Sentinel;

National	Rasmussen Tracking	Obama 51, McCain 45	Obama +6
National	Reuters/CSpan/Zogby Tracking	Obama 47, McCain 45	Obama +2
National	Hotline/FD Tracking	Obama 45, McCain 44	Obama +1
National	GW/Battleground Tracking	Obama 49, McCain 45	Obama +4

The Obama campaign is trying to counter with accusations of racism and by rehashing a badly warped version of the Keating 5 story.

In my opinion, in and of itself, the debate was a net tie, but McCain laid the ground work for a very tough October for the Obama camp.

Palin Email Hacker Indicted

From Fox News

A federal grand jury in Tennessee has indicted a man in connection with the hacking of the e-mail account of Republican vice presidential candidate Sarah Palin.

A federal grand jury in Tennessee has indicted a man in connection with the hacking of the e-mail account of Republican vice presidential candidate Sarah Palin.

Federal officials say that 20-year-old David Kernell of Knoxville, Tenn., was indicted by a federal grand jury in Knoxville for intentionally accessing without authorization the e-mail account of Palin, Alaska’s governor.

Kernell has turned himself in to authorities and is scheduled to be arraigned Wednesday before a magistrate.

Kernell is also the son of prominent Tennessee Democrat and State Senator Michael Kernell.

Black Congressmen: Palin Is A Racist! She Uses Code Words!!!

From The New York Observer

As the McCain campaign ratchets up the intensity of its attacks on Barack Obama, some black elected officials are calling the tactics desperate, unseemly and racist.

“They are trying to throw out these codes,” said Representative Gregory Meeks, a Democrat from New York.

“He’s ‘not one of us?’” Mr. Meeks said, referring to a comment Sarah Palin made at a campaign rally on Oct. 6 in Florida. “That’s racial. That’s fear. They know they can’t win on the issues, so the last resort they have is race and fear.”

“Racism is alive and well in this country, and McCain and Palin are trying to appeal to that and it’s unfortunate,” said Representative Ed Towns, also from New York….

….Ms. Palin told donors in Englewood, Colo.,….  “This is not a man who sees America like you and I see America,” she said. “We see America as a force of good in this world. We see an America of exceptionalism.”

An Associated Press analysis characterized those remarks as “unsubstantiated” and carrying “a racially tinged subtext…..”

“Some may say their true colors are showing,” said Representative Yvette Clarke of New York. “Others may say they’re just not being thoughtful. But certainly a lot of the language I’ve heard I consider to be incendiary. I believe it is meant to generate a certain sentiment within their base that engenders fear and certainly appeals to a group of people within our society who would pursue this along racial lines.

“It’s very clear,” she said.

Ms. Clarke also found a racial subtext in Ms. Palin’s repeated appeals to “Joe Six-Pack” and “hockey moms.”

“Who exactly is Joe Six-Pack and who are these hockey moms? That’s what I’d like to know,” she said. “Is that supposed to be terminology that is of common ground to all Americans? I don’t find that. It leaves a lot of people out.”

New York State Senator Bill Perkins, an early supporter of Mr. Obama, said, “They are obviously playing on people’s fears and prejudices in a desperate way. While not explicitly relating to race, they are clearly creating the opportunity for those inclined to come to those conclusions. I think it is going to become more explicit as we move forward. It’s subtle now, but not so subtle as to be mistaken.”

And Kevin Parker, a New York state senator from Brooklyn, said, “If you have to remind people that Barack Obama is African-American, you have reached the bottom.”

 

I have a very serious question…

Have all the Democrats that drank the Obama koolaid become paranoid schizophrenics?  I really wanna know.  If you tell me yes, it will make me feel much better.

I will understand that they have a mental illness that they can’t help…  the delusions of persecution from an oedipal female mother figure archetype would just be the product of a disease and not what these people REALLY think…

Or perhaps they all share a strikingly similar form of Tourette’s Syndrome where “code words” and “racist” gets blurted out at nonsensical times…

I don’t know, but this bullshit is friggin crazy, it is incredibly irresponsible, and to be honest, it is incredibly dangerous.

Add this to the coments of other Democrats of all races that have screamed the word “RACISM!!!” and pointed their fingers at everyone from all the Republicans to Bill Clinton of all people!!!  (Holy God, was that some serious dumb.)

Regardless…  This is only further dividing our society and creating a dangerous sentiment of suspicion and anger…  and in this case, it can create a very different situation where, if these irresponsible politicians and the media that perpetuates their message continue to push this idea that there is rampant racism in white America and that racism could be the only explanation as to why Obama would not win the election…  we could very well see irreparable damage done to race relations in the country AT BEST, and at worst we will see racial violence and rioting.

It’s almost as if that is what they want?  They may not, but they are definitely not hiding the fact that violence and repercussions are what they are threatening.

The anger these people are toying with is real, it is dangerous and it is explosive.  There are historical precedents to situations with much less gravity than the Office of the President that have sparked violence  that we can point to, so we know the threat is real.

The saddest part of this whole thing is that it is THE standard campaign tactic in Obama campaign manager David Axelrod’s playbook.  Axelrod has done this same thing many times before, and in many campaigns, even as recently as the primary versus Hillary Clinton.

Inciting racial hatred and suspicion to gain power is what these people do.  This is quite literally David Axelrod’s niche in political campaign management.  This is his job and this is why Obama hired him.

This is dangerous and they need to stop.  It is wrong and irresponsible.

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Am I saying racism does not exist, no I am not.  It does still exist, regrettably.

But the vast majority of Americans are not racist, and when they cry racism in an undeserved context, they are actually  diminishing not only themselves but the one they sought to defend.

When these people cry racism in such situations, they remove the humanity and the complexity of the man that Barack Obama is and reduce him to his skin color.

There are a great many reasons to love Barack Obama, just as there are innumerable reasons to really dislike him.

When they reduce the reasons why people feel about Obama the way they happen to down to just skin color, THEY are the ones dehumanizing him, not Palin, not McCain.

When they reduce Obama to his skin color, THEY are the ones that have issues with race, not Palin, not McCain.

McCain campaign spokesman Peter Feldman said it best:

“It is disappointing that Barack Obama and his supporters continue to play the race card from the bottom of the deck. This is a tactic that the Obama Campaign has used before, and which McCain campaign manager Rick Davis correctly called ‘divisive, shameful, and wrong.’ It is legitimate for John McCain to ask questions about Barack Obama’s relationship with the unrepentant domestic terrorist William Ayers because Senator Obama has not been truthful about this relationship. Many Americans want these questions answered. Despite the fact that Barack Obama has been running for president since joining the Senate, many Americans are still wondering, ‘who is Barack Obama?’ These comments are a sure sign of a flailing campaign that refuses to be honest with voters and that is bordering on desperation.”

Instead of Obama bringing us together like he promised to do when he gave his rhetorically brilliant yet somehow empty speech on racism, it seems his sole aim is to divide us as much as possible to gain a political advantage.

He wants power so bad, he is willing to wreck America to get it.

Hell No, No Bama, No Deal, No Friggin Way.

Country First.

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UPDATE:  I woke up this morning and turned on CNN and guess what was on…  a special about Union activists campaigning door to door in PA and OH, and their struggle to deal with racism against Obama….  Nice, right?

So I listen for a while and then it peeks it’s head out in one of the comments…  a canvasser talks about how he has run into the problem “a few times.”  Well, as a canvasser you can visit hundreds of homes a week…  and in a predominantly white, blue collar, working class, heavy union neighborhood, they run into the problem a “few times?”

And this justifies a CNN special report why?  Oh yeah, it’s spin and bullshit.  That’s why.

And then there was the statement from Obama…  I am doing this from memory, but this is what he said almost word for word…

I don’t think race is a problem in the race.  Look, I am ahead in the polls…  that means that the American people are basically good.  They are judging me on my policies and on what I want to do, not my skin color.

Ok, on first pass, not a bad statement, right? 

But we have to look at the more subtle meaning of what he said… 

“Look, I am ahead in the polls…  that means that the American people are basically good.”

He subtly hints that if he were behind in the polls or that if people were to vote against him, then they would not be good and they would be racist.

Those are code words.  Real code words.

Palin’s comment about terrorists…  not code words.

Obama Funneled Earmark Money To His Family

Coming on the heels of a report that Obama got a $20 million grant for his former boss and current supporter, Allison Davis, who also has strong ties to Tony Rezko, is this little gem.

Turns out there was an earmark free-for-all in Illinois for a few years, and Obama was loving it…

From Breitbart/AP

As a state senator, Democrat Barack Obama awarded $75,000 in government grants to a Chicago social service organization led by a rabbi who is also his wife’s cousin, records show.

In 1999, Obama arranged for $50,000 for adult literacy and counseling services offered on Chicago’s South Side by a group called Blue Gargoyle. A $25,000 grant for the group’s youth services followed the next year.

The group’s executive director when the grants were awarded was Capers Funnye, a South Side rabbi and Michelle Obama’s first cousin….

At the time, Illinois legislators were handing out hundreds of millions of dollars in grants. The money was part of a deal that legislative leaders cut with the governor to approve a major public-works program.

Each legislator could award money to favored groups and projects with basically no oversight. The grants were known as “member initiatives” and were similar to the congressional “earmarks” often criticized in Obama’s presidential campaign against Republican John McCain.

Obama awarded about $6 million for everything from literacy programs [that his cousin ran] and park improvements [for a park that never got built] to drill team uniforms and jazz appreciation events.

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Fantastic analysis from Hot Air

So Obama had no idea that his wife’s cousin ran this group when he earmarked the money?  That seems very, very difficult to believe.  Funnye had to apply for the grants, and his name would have been on the application.  Just the act of filing that application with Obama makes it clear that he sought favors from Obama, specifically Obama, and that Obama granted them.

Funnye claims that the earmarks (called “member initiatives” in Illinois) met legislative guidelines, but none existed during that period for earmarks….

Barack Obama reveled in that system.  He sent money to friends and family (Michael Pfleger and Jeremiah Wright were two more recipients of his largesse) as an Illinois state senator, and as a US Senator, he sent money to his wife’s employer.  Obama requested more than a million dollars a day in earmarks in his first three years in the Senate.  He’s not part of the solution to Washington’s corruption — he’s part of the problem.

I could not have said it better.  Hats off to hot air.