By Robert Romano
On July 31, Federal Housing Finance Agency (FHFA) acting director Edward DeMarco once again rejected an Obama Administration plan to bail out borrowers who owe more on their mortgages than their homes are worth, citing cost concerns.
The FHFA, which administers the government's conservatorship of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, undertook an analysis of the program, showing reductions of mortgage principal owed for certain borrowers would cost taxpayers more and even potentially result in more defaults.
Even under the program's best case scenario, the Agency estimated just 248,000 borrowers would be eligible for principal forgiveness under the Home Affordable Modification Program Principal Reduction Alternative ? or just 2.2 percent of the 11.1 million borrowers nationwide who are underwater.
That means that even if DeMarco had implemented the program, approximately 97.8 percent of underwater borrowers would not have even been eligible. Therefore, more than $700 billion of the $717 billion of negative equity in homes nationwide would have remained unaddressed.
In other words, even if DeMarco had relented, this bailout would have done almost nothing to solve the problem of underwater borrowers. Yet, Treasury Secretary Timothy Geithner, in a letter to DeMarco responding to his decision not to implement the bailout, maintained the fiction that the program would somehow "help repair the nation's housing market".
New York Times columnist and economist Paul Krugman goes further, calling for DeMarco to be fired for not implementing a bailout almost nobody would qualify for, writing, "even if there's a small net cost to taxpayers, debt relief is still worth doing if it yields large economic benefits."
But even if debt relief did yield economic benefits in certain cases, this is not one of them.
According to the FHFA, some 80 percent of underwater borrowers who have GSE mortgages are current on their payments. But that could change if a bailout is implemented.
As DeMarco noted in his letter to Congress, selective application of the program could create a perverse incentive for borrowers to miss payments and potentially default in a misguided attempt to qualify for the bailout.
Under the program's best case scenario ? where all 248,000 underwater borrowers qualify ? if just 19,000 of the 10.8 million remaining borrowers who did not were to strategically default, it would more than offset any potential benefit derived.
As a result, "HAMP PRA would result in a net loss to taxpayers, even using the model-based assumptions most favorable to the program," wrote DeMarco.
Of course, it's all political. Don't let anyone tell you different.
"Obama's goal is to build a constituency of borrowers underwater on their mortgages with the hope that they might ? emphasis on might ? be able to get some relief," said Americans for Limited Government President Bill Wilson, calling it "nothing more than a cynical election year ploy."
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ObamaCare Going Into Effect, Maine Fights Back
Video by Frank McCaffrey
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K Street Republicans' war on Palin
As originally published at TheHill.com.
I'm getting sick of the rewriting of 2008 presidential campaign history as K Street Republicans continue to assault Sarah Palin in the fear that a similarly conservative Republican will rise to the top of the VP sweepstakes.
It has been so fashionable in D.C. Republican circles to bash the Palin nomination as a mistake, ill-conceived or even disastrous, that even Dick Cheney has gotten into the act.
These self-serving attempts to change history are nothing more than a smear campaign designed to influence the Romney VP pick by obscuring the truth that the choice of Sarah Palin to be the vice presidential nominee was truly inspired.
The McCain campaign was in the doldrums. Unable to match the youth and enthusiasm of the inexperienced but expert campaigner from Illinois, McCain needed to shake up the race, and Palin accomplished just that.
Her incredible acceptance speech, delivered in spite of a faulty teleprompter (try that, Mr. President), gave the nation a new face and voice for conservative principles just when it was desperately needed.
That same energy from the convention rolled over into the 2010 election, embodied in the Tea Party movement and leading Republicans to a historic victory.
History shows that it was the McCain campaign that blew any chance at election when it suspended its efforts fully three weeks after the nomination to come back to D.C. and rubber-stamp the TARP bailout.
Having agreed upon the legislative actions that socialized losses by too-big-to-fail banks, McCain lost all ability to differentiate between himself and the big-government policies advocated by Obama.
Pollster Scott Rasmussen reported on Sept. 20, 17 days after the Palin pick, that his daily Presidential Tracking Poll "shows Barack Obama with 48 percent of the vote and John McCain with 47 percent. While Obama's lead is statistically insignificant, it is the first time he has held even a single-point advantage in a week and a half. One week ago today, McCain was up by three points."
For the mathematically challenged, this means that less than two months from the election, McCain and Palin were leading in the polls.
Rasmussen goes on to say, "Obama's gains over the past week came as the focus shifted from the momentum generated at the Republican National Convention to the economic rollercoaster ride that played out on Wall Street. Few agreed with McCain's initial statement about the economy being fundamentally sound and neither candidate has yet convinced voters that he will bring the needed changes to the financial markets."
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ALG Editor's Note: In the following featured editorial from the Pittsburgh Tribune-Review, the board lays waste to Harry Reid's claims that Mitt Romney paid no taxes:
The Reid smear: Vermin droppings
Harry Reid beats his wife.
The Senate majority leader also leaves restaurants without paying his bill.
And the Democrat of Nevada lets his dog poop in his neighbor's yard and never cleans it up.
We don't know any of this to be true, mind you. But we have heard these allegations. From whom? Sorry, we're not in the habit of revealing our sources.
Of course, it's up to Mr. Reid to prove otherwise.
Reid doubled-down last week on his allegation that presumptive Republican presidential nominee Mitt Romney did not pay any federal taxes for a 10-year period. An unnamed investor with Bain Capital, Mr. Romney's former company, told him so, Reid said.
And, he added, it's now up to Mr. Romney to disprove the anonymous and undocumented charge.
"So the word is out that (Romney) hasn't paid any taxes for 10 years," Reid said from the Senate floor, rhetorically elevating a smear to a faux fact like so many vermin droppings. "Let him prove that he has paid taxes, because he hasn't."
Romney denies the charge. "It's time for Harry to put up or shut up" and produce proof of his allegation, he said.
Expect that to happen on the same day that Harry Reid actually is arrested for beating his wife, for not paying his restaurant tab and letting Fido do the big No. 2 in the neighbor's yard.
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