Update: Bush says no bailout for lenders, speculators

As banks lobby for what has been described as an "epic rescue plan" for the mortgage industry, President Bush today hardened his oppostion to bailout plans he said would help "lenders and speculators." Bush said such plans would be unfair to millions of homeowners who pay their mortgages on time.

USA Today: "Echoing Treasury Secretary Henry Paulson, Bush says a Senate proposal to deal with the foreclosure crisis would 'do more to bail out lenders and speculators than to help American families keep their homes.' "

Update: It's worth noting the specific objections the administration has to the Senate bill on foreclosures. From CNN Money: "Earlier this week, the Bush administration said the president would veto the Foreclosure Prevention Act of 2008 if it passes Congress because it objected to two key elements. The first is a provision that would change the bankruptcy law to let judges reduce the amount of principal and interest due on mortgages of those filing for bankruptcy. ... The administration also objects to a provision in the bill that would provide $4 billion to let state and local government buy and rehabilitate foreclosed homes, and improve disclosure of subprime mortgage loans in hopes that borrowers won't be surprised by big payment increases."

Commentary: It's impossible to separate politics from principles here. The president knows that bailouts are unpopular, so he argues the bankruptcy changes -- which have nothing to do with a bailout for lenders -- are part of a bailout for lenders. Ah, very clever. Very cute. And completely consistent with the lack of intellectual honesty that dominates American politics at the moment. If you don't like changes in the bankruptcy law, why not step up and say so?

It's also disappointing that, at today's news conference, none of the reporters bothered to follow up on this. 

Still, Paulson's comments (see below) were pretty clear. Paulson shot down talk of a real bailout for lenders. So, some politics, some principle.

The president's comments came a day after his Treasury Secretary dismissed called for a massive rescue plan for the mortgage industry. From the Wall Street Journal: "The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners."

This would be the "epic rescue plan" cooked up by Bank of America that the New York Times reported on last Friday.

More: "In an interview yesterday, Treasury Secretary Henry Paulson branded many of the aid proposals circulating in Washington as 'bailouts' for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers."

From Smart Money: "President Bush and other administration officials have voiced skepticism before about a major government effort to ease the burden of the nation's housing slump. But Paulson's comments are the most explicit to date in laying out the administration's opposition to the recent spate of rescue plans.

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Reuters

Comments

[LA Real Estate Dude]

The president says he favors modernizing the Federal Housing Administration and government-sponsored enterprises. Exactly what and when he intends to implement these changes would appear to be the bigger question. Mr. Barnake has stated a need for a "contingency plan" but he also feels that the economy doesn't need one just yet. All this posturing makes It hard not feel that Bush administrations politicking on the subject has something to do with the fact that the Dems, as well as bankers and economists, are the ones coming up with the alternatives. With 2 million families expected to lose their homes within the next year, the GOP might have a sinking ship on their hands that no amount of bailing out will fix.

[Krishna McIver]

I have not seen eye to eye with this administration, but I have to agree with the President on this legislation. Times are tough, but I have been able to pay my mortage and stay afloat. Why can I get the same support? I am stuggling just like these people that are losing thier homes, the only difference is that I knew what I could afford when I bought my home.

[Gina]

The question of whether or not to engage in a rescue plan is utterly pointless because there simply is no money to do so. The pricetag on the Iraq Debacle will come in at $3 trillion. Bush lowered taxes and recklessly increased spending, adding a record burden to the national debt. He has about as much economic sense as the minimum wage folks who bought in Moreno Valley with subprime mortgages. (And now the dunce is telling us we're not heading into a recession -- like he knows.) Fasten your seatbelts, kiddies, we're heading into very ugly financial waters.

[Lou]

If McCain wants to improve his chances of the White House he should latch onto this issue.

If there is one thing that I've seen here in CA that unites Democrats, Republicans, liberals, and conservatives it's their opposition to any type of bailout for banks and borrowers. The only people who support a bailout are socialists.

I hate Bush and thought for sure I'd vote Democratic this year but all this bailout talk by all these Democratic politicians are puching me towards McCain.

[Cal]

I think if the cramdown language was removed the legislation would pass (the portion of the bill that isn't a bailout)... I dont really think they care about the money spent but are cowtowing to the big banking interests on the bankruptcy legislation and hiding behind the "no bailout" fig leaf.

[blackbox]

It's about time some sanity hit the Bush Admin.
Pres. Bush will be the firewall against rewarding the irresponsible until Jan 20, 2009. God help US taxpayers if a democrat is elected!

[Digitalian]

I am an independent voter who has rarely agreed with Bush on any important issue but this is one where I actually do agree with him. But that worries me because I think those who reflexively disagree with him on everything will automatically decide that a bailout of lenders and speculators/fraud artists must be a good thing (e.g. like Kieth Olberman did on his show last night).

[theproblemwithcaring]

Bushco should get credit for recognizing its all now too little too late.

Their constituency (the banks) can't be saved by the government alone. They therefore have no incentive to negotiate a bailout.

[Laker]

I sure hope Bush prevails this time and keeps his "promise" of not bailout to speculators, flippers, and lenders.
Maybe they are sensing the growing amount of support from people that are paying their mortgage on time, first time home buyers, common sense people, etc. These people will not and should not pay the failing mortgages of the deadbeats.
Healthy market that seeks appreciation needs a steady supply of 1st time home buyers. If you eliminate 1st time home buyers, there will be no buying from them. People could not move up/upgrade, and price will stagnate nominally at best. In real values, they will lose value as the inflation will eat the dollars.
Also, Big Ben should stop sl;ashing the funds rate and start increasing it. Otherwise, inflation will get out of control, and mortgage rates will sky rocket...in such condition, the big Ben will get himself in a position of a need to hike the rates to double digits in order to starve the inflation. The dollar is at all time low 1.51 for a Euro...

[ash molari]

Never thought I would get a chance to say this in my lifetime - but for once, I am thankful that Bush is in power (ONLY as it relates to this crisis) and not some limousine-liberal democrat. Way to go!!

[RichW]

Bush says a Senate proposal to deal with the foreclosure crisis would "do more to bail out lenders and speculators than to help American families keep their homes.'"

At least we can count on Bush to veto this crap in its current form. Just imagine how Hillary or Obama would deal with this. We could be in for a lot of problems depending on who wins the upcoming election. Too bad it isn't going to be Ron Paul.

[Jenna]

Wow, I actually agree with President Bush on something. If it wasn't for that pesky Iraq war and being pro-choice, this life-long Democrat would actually consider voting Republican. Can someone please tell the Democrats that giving away my money to bail out irresponsible bankers/home buyers isn't the way to my heart?

[jb]

I do not like a single thing that Bush has done in office, .... except for this. Hilary and Obama better get a clue, if they keep proposing bailouts, we will have another republican president (For the first time in my 42 year life, I would consider switching teams for this)

[Stephan]

For once I agree with the administration and the Republicans. This issue will make me vote for McCain if the Democrats continue to push bailout for irresponsible people, or the builder/real estate interests who want to inflate the housing market. While we're at it, let's help out those who can't make their boat payments too. Whatever happened to accountability in this country?

[Raul]

On this one Bush is right. Clinton, Obama are wrong.

[Mike Jensen]

I cant believe that I'm about to say this, but.... I actually agree with something Bush said!

.... I feel somehow dirty now...

[Mike P.]

Paulson and Bush saying the right thing?!?!?!

WHOLE..... WORLD..... IS..... SPINNING......

EVERYTHING...... GOING..... GREY....

[proud]

I never thought I'd ever be proud of Bush, but his opposition to the bailout makes me happy.

[Robert in Palm Springs]

It is very difficult for me to agree with Bush on anything, but this time he is right. The government needs to stay out of the mortgage business. Let the market to its work and find the true value of real estate. It may be painful for some but it is the only fair, capitalistic way.

Having said that, it seems also fair that the private auctions being held almost weekly by the Fed should be made public. We know that over $150 billion have been loaned to borrowers with dubious collateral so this, too, seems unfair and without oversight. Congress once again is complacent and simply goes along with Bernanke and co. Our government has done everything in secret for 7 years; this must stop.

The complete lack of lending standards and banking/financial regulation created the opportunity for Wall Street to exploit the public and create the worldwide financial crisis we now face. Doing more of the same or creating bailouts (i.e. the recent idiotic stimulus bill whereby our government borrowed money from China to encourage us to go out and spend the money on goods from China we don't need) shows just how absurd our entire economic model is. We are consuming ourselves into permanent poverty!

Recessions are a normal part of the business cycle. When there are excesses (and the recent excesses are unparalleled), a contraction must follow. The longer we postpone it, the deeper and more painful it will be. Housing is the core of this adjustment because it was the fuel that fed the false economic expansion since 2003.

No one is addressing the core issue: We cannot sustain an economy based on consumption, especially if that consumption is paid for by debt. It has NEVER worked in the history of the world and will not work now.
We MUST rebuild our manufacturing base to create real jobs for people to make real goods for trade and self sufficiency.

This is the end of the "me generation", the society of entitlement and immediate gratification without work. Either we will come out stronger with better, more realistic expectations and values or we won't. If we don't then it is over for us.

[Ex Patriate]

This marks the first time I have agreed with any decision by this administration.

[Chris in Sacramento]

This is exactly the sort of thing that turns young Democrats into middle-aged Republicans.

Democrats should be the party of sufficient regulation and equal opportunity, not of bailouts for the foolish or greedy.

[NationalBubble.com]

Anybody who ever bought a house knows how many documents you have to sign? There is no excuse. These people got themselves in this mess because of their own greed. Everybody wanted to buy a house, even if they didn't have a stable job. The lenders were responsible but nobody put a gun to the buyers head to forece them accept the terms of the loan.

By the way, I just finished reading this great book about this subprime mess. The author tells you everything that was going on during the boom days. It is pretty disgusting to see what money does to people.

http://tinyurl.com/398fem

[Dave T]

I agree with Bush on this one (a rarity). But I wonder about the quote from Henry Paulson ...."provide meaningful relief to deserving, but cash-strapped, mortgage borrowers".

Who are these "deserving" borrowers? People who bought houses they can't afford?

[sunsetbeachguy]

This thread is SO beautiful!

I am NO Bush fan, but...

At least Bushco is getting one thing right during their 8 year tenure.

[IToldu2CashOut]

I've never voted republican in my life, but Hillary and Obama talking about bailing everyone out makes me sick. Maybe McCain wouldn't be so bad. If it wasn't for the supreme court I would vote for him, maybe I still will. We need to get real about our economy, taxes are going to have to go way up for the wealthy if we are going to stay a first world country. The Iraq war and other wasteful weapons spending need to go. People need to start living in there means and if they think the government is just going to bail them out thats never going to happen. Next time the mob of morons are all jumping of the golden gate bridge maybe more people will think twice.