Hillary on housing: Clinton's foreclosure bailout plan

Sen. Hillary Clinton (pictured) made a political speech today about the foreclosure crisis, and as a political effort, it may prove fairly successful for her. But, thankfully, this is not a politics blog, so my analysis can largely ignore politics and stick to housing and economics.

Of the three presidential candidates, Clinton's fix is the most aggressive -- the biggest bailout, if you will. That makes it the most offensive to those who believe the solution to artificially inflated housing prices is, yes, a period of declining housing prices. Instead, she says the government should get ready to start buying mortgages: "... I believe the Federal Housing Administration should also stand ready to be a temporary buyer -- to purchase, restructure, and resell underwater mortgages."

She also proposes a freeze on foreclosures and a $30-billion fund so that cities and states can start buying foreclosed and "distressed" properties for possible resale or rent (Imagine the bungling, the fraud, and the favoritism, if the city of Los Angeles -- which can't even keep track of foreclosed houses -- gets a pile of federal money to start buying them).

The headline-grabber was the suggestion that the president assemble a group of economic geniuses -- an "emergency working group on foreclosure." She suggested, evidently with a straight face, that the group would be led by "nonpartisan" economic leaders like former Treasury Secretary Robert Rubin.

Now, Bob Rubin is a smart guy and all that, but he served in a Democratic administration, which his not a bad thing, but is not "nonpartisan."  Further, he works for a company, Citigroup, that, as Fortune recently reported, "has written down more than $24 billion in losses due in large part of greed, cynicism, and bad judgment." Citi has been so wounded by the mortgage mess that Rubin had to jump on a plane and fly halfway around the world to ask the government of the United Arab Emirates for money. This is a nonpartisan figure capable of objectively analyzing the mortgage crisis? This is like putting Snoop Dogg on an anti-drug panel.

Clinton manages to acknowledge that reckless borrowers bear some responsibility for the housing mess, but can't bring herself to call it what it is: the inevitable unwinding of a bubble of unsustainably high prices and disastrous lending against those prices.

She also can't bring herself to blame her good friends on Wall Street -- see Rubin, Robert -- for their role in the mess. This is not an oversight. Instead she tries to score a few points by calling attention to the Bear Stearns bailout, without actually criticizing it. Populism Lite.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP

Comments

[NationalBubble.com]

What Hillary Clinton is trying to do with this mortgage bailout is disgusting.

[the problemwithcaring]

Frank Rich talks about how if one delves into most of Hillary's policy prescriptions, one eventually finds that they all culminate, somehow, in a Blue Ribbon Commission.

"No matter what the problem, she keeps rolling out another commission to solve it: a commission for infrastructure, a Financial Product Safety Commission, a Corporate Subsidy Commission, a Katrina/Rita Commission and, to deal with drought, a water summit."

Ready to ruminate on day one!

[JohnnyB]

Peter Viles,

I've enjoyed reading/posting on your blog for a while now. My last 4-5 posts haven't even been posted. Seems the “politically incorrect” radar is running a little hot amigo…

I guess for this post I’ll just say…

This Clinton lady is wrong.

[msprompt]

Completely outrageous!! An absolute insult to thinking people everywhere. Every time I think I cannot get any angrier at this mess, I open the morning newspaper or click on a blog and BAM! Freshly pissed off again.

[jaded]

wow, I'm voting for Hillary!

with enough taxpayer money and enough socialist-leaning egghead commissions, there's nothing the Feds can't solve!

which line do I stand in for my handout?

[Laker]

Clinton: "...It is a sensible way for everyone - lenders, investors, mortgage companies and borrowers - to share responsibility..."
Why do I, that acted responsible and did not buy into inflated market or refinanced the house and pulled cash to buy boats and vacations, have to SHARE responsibility with the scumbags, dead beats, and all flippers/fraudster that should have never been allowed to buy in the 1st place.....
We the TAX PAYERS do NOT want to share that responsibility. How come when the dot.com crashed in 2001, nobody share the losses. Those that were invested simply lost money.
How come nobody shared the wealth during the 2000-2006 run in prices???
And how come she does not even once mention the word affordable housing as in houses that were overinflated, and people simply can't afford them!
What a loser, I will do anything i can to convince not to vote for her.

[Inland Empire]

As with all government programs, the middle class will not benefit. I think you are right on as far as graft, greed, favortism, greased palms etc.

[jdj]

Peter,

Rubin, the 'headline-grabber'?!?
Are you kidding? The 'headline-grabber' is that she wants Greenspan to lead the group -- The guy who caused all this.

Brilliant!

[P]

I can't believe I am about to say this... if Hillary somehow manages the Democratic nomination...I will vote....*holds nose* Republican.

Luckily, it's not possible for her to win it without the delegates voting against the people's wishes. Me thinks that would not go over too well with the people.

After reading this, I wouldn't even want her on the ticket as VP.

[MyLessThanPrimeBeef]

I know how she thinks...it goes like this, boy (or girl), oh boy, (or, oh girl), we have come a long way from those 'A cave for every caveman (or cavewoman)' days. This deplorable situation in real estate is completely intolerable! We are much more civilized than those Neantherdals (just between you and me, we are not). And if every caveman or cavewoman could have a cave, then every modern man or woman must have a modern house. So, I propose everyone should have a house.

That's what is going through her mind, I think.

And if I may be so bold as to show that I can be smarter than her, I propose that everyone should be president...you might call it univeral political power sharing or something.

[treetime]

Back in the USSR, you don't know how lucky we were!!!!

Clinton is so clueless and so ignorant. All she ever accomplished in her life is getting a law degree (big deal, I have one) and she married well!!! Really well!!!

It's just to much for a rational human being to take.

I would really like to write what should be done with the Clintons (and the Bushes), but I better not.

(I'm a woman by the way- so this is not sexism...)

[IToldu2CashOut]

Now I remember why I voted for Obama and why in the future I'm voting against every incumbent I can until this housing mess is over. McCain is a moron, but he's looking pretty good in comparison.

[Central Valley Guy]

I'm a lifelong diehard Democrat but her bailout plan for the legion of losers and DNA disasters who brought us to this crisis point is absolutely beyond the pale. If she is the representative for the Dems come November, I'll be looking at other options and convincing everyone I know to do the same. My wife and I have spent six years saving money and waiting to buy an affordable home in L.A. and now she wants to use the power of the government to make it impossible for us to do so??!!??

[treetime]

For the past two decades or perhaps the last decade, it's always the same players in politics. We really don't have a two party system anymore. Rubin, Greenspan, Bushes, Clintons, Cheney, Gore etc....they all have the same goal, to enrich themselves at the expense of the American Taxpayer and the expense of the American System.

We really do need some new leadership, although I'm not sure if it will make much of a difference. At least a new face to look at, I guess.

[mbob]

Repubicrats.

A pox on all their (leveraged) houses

[firesale]

The headline-grabber was the suggestion that the president assemble a group of economic geniuses -- an "emergency working group on foreclosure." She suggested, evidently with a straight face, that the group would be led by "nonpartisan" economic leaders like former Treasury Secretary Robert Rubin.

Just GREAT, Hillary!

Let's assemble our biggest foxes and put them in the
hen house. Isn't that how we created this situation?
Are the American people really stupid enough to listen to her sh--?

[l.a.guy]

Putting aside the issue of whether or not it's a sensible policy, I wonder where the $30B price tag comes from? Based upon the bank write downs we've already seen and the amount of loans awaiting their day of reckoning, $30B would seem to be a hugely optimistic number.

If there were a mechanism for establishing the REAL current market value of homes, and the GSE's could by the loans at 80% of the value, then it may be worth doing in order to restore confidence to the financial markets.

I know 99% of the readers of this blog will only be happy when every last commercial and investment bank has filed for bankruptcy and houses are selling for their 1950's prices, but considering what we piss away on Iraq every month, wouldn't it be smarter to invest some money here in order to shore up the US economy?

If lenders have to sale the loans at real market values they will take tremendous losses, (I'm sure some will still go out of business) and the exposure to the tax payer would be limited as long as the LTV's reflect real value, not 2007 values. I agree there is good reason to be skeptical the government could execute something like this without totally screwing it up, but we may have little choice if we want to bring this debacle to an end sooner than later.

[lefty]

hey guys, spain or france or mexico, nowhere else in the world beats metro L.A., and you know the time to buy is right now!! grab yourself a nice place and chill out for a few years, you will not regret it!

[left of lefty]

fortunately for the democrats, obama will most likely take the nomination.

though he has his own bailout plan as well.

in any case, it's hard to imagine the democrats screw up so badly that they would lose this election. so chances are some type of bailout will occur and put a floor on housing prices. it's not a bad idea to start looking at buying again.

[tom]

Ralph Nader was right when he said there is no real differences between our two parties.
we need a system like Russia where the top two vote winners have a runoff. That way people would take a chance on voting for the underdog who they really agree with without giving the election to a party they hate.

[RZ]

If she wants to have the government buy mortgages, fine. But there should be no moratorium on foreclosure. The market will never fix itself if the prices aren't allowed to adjust. And irresponsible consumers will never learn lessons if they see others get bailed out to such an extent.

[Lost in Deutschland]

In previous postings I've asked this question before, but no one answers it.

I'll ask again: If we do not have a 'bail-out' like the Clinton plan or the Dodd-Frank Bill, then what are we going to see? Are we willing to stand on our principles and see our economy go the way of Japan of the previous decade?

Wouldn't it be better to bite the bullet on this one and make a quid pro quo with the investment houses - stating we will help you out, but you need to accept regulations that will prevent this type of reckless speculation.

Because doing nothing is what the Hoover Administration did from 1929 through 1931.

[peteviles]

Lost in Deutschland writes, "Wouldn't it be better to bite the bullet on this one and make a quid pro quo with the investment houses - stating we will help you out, but you need to accept regulations that will prevent this type of reckless speculation."

Thanks Lost. That's an interesting question, but Clinton did not propose new regulations to curb reckless speculation or to regulate largely unregulated investment banks.

[Liz Wetzel]

This is the doing of the Republican Party. Their Motto is : Small Government, then let out their greedy members let loose, speculating market. I personally know one guy from Michigan, stayed in CA for a while to invest in that scam where his partner would sell a 100k house to him for a 400k. Of course he just walked out after, went back to Michigan. NOW how dumb is the democrats to take the fall. DO NOT bail out the banks, go after those scam artists, the same republicans and youll win over this creatures. Do not make us pay from our tax dollars.

[NoWayinLA]

So Hillary's big plan is - make a plan. Brilliant!

My daughter used to sound just like Hillary. She'd randomly say, "We need to make a plan." She's three. And I think she'd make a better president than Clinton. I already voted for my daughter in the primary. She's capable of accomplishing at least as much real change in the health care system as Hillary did. And she can make poopies in the potty all by herself.

Deutschland - Actually, the bailout is very similar to what Japan did. The cheap-money Fed moves this year have already set us on the path to Japan-style stagnation. The sooner home prices fall back into rational, affordable levels, the sooner transaction activity resumes and gets the economic blood pumping again.

[puckhead]

l.a.guy,

I agree with you. The biggest obstacle in the financial markets right know is that there is no mechanism to value all these mortgage back securities sitting on everyone’s balance sheets. Once housing prices settles and delinquent rates level off, you can then value these securities. Once banks know the risks, then can deal with the risks. But right now, they’re all operating in a dark tunnel and everyone is gun shy about lending money. The gov’t can deal with this situation two ways. They can do the laissez- faire approach and let the banks hoard money, choke off capital and choke investment into the economy and let a few banks go under and drive the country into a depression. Or the govt’t can do everything in their power to establish a market for mortgage back securities so that banks can get a handle on their risk, take the write-downs and get back to the business of lending money. No economy in the modern world can grow without access to capital. As much as the bloggers here seem to hate banks, they are needed to grow this economy. Minus the access to capital and you’ll have the economy of a third world country.

[Liz Wetzel]

you didnt post my earlier comment so obviously youre a republican just disparaging Hillary. STOP BLAMING HILLARY ON THE MESS THAT THE REPUBLICANS MADE.

[waitingforgodot]

Newsflash: Obama's plan will involve a bailout as well. Don't deceive yourself. I'm saying this as a lifelong Democrat.

Time to start writing letters. Yes, I got off my complacent rear end.

[Enlightenment]

Clinton shut the heck up, you don't know jack, same for all of you other two-faced candidates that are blowing hot air of fake promises to win votes.

It doesn't matter what presidential candidates propose because they won't be in office until 10 months from now, and the economy could be in a completely difference situation by that time.

The government should NOT bail out the housing mess! I am flipping tired of our governement throwing away my hard earned tax dollars to save greedy idiots!

I want the governement to make very strict laws to prevent this from happening in the future, and I want the governement to track down and punish everyone that committed fraud during this housing mess, otherwise quit trying to fix a problem that you should have prevented years ago!

[treetime]

Lost in Germany,

Listen up---the subprime mess is a fraction of the real problem that banks, Wall Street are contending with...bailing out the subprime mess causes the following: it devalues the dollar or raises our taxes enormously which puts a strain on the economy, people are still going to lose their jobs regardless if there is a "bailout" or not. If you put a stop on foreclosures you are preventing new buyers from entering the market. There are several homes in my area that are short sale listed right now, let them be foreclosed on if necessary and there will be buyers next time around, the price will be different as it should be. We can't sustain ourselves in an artificial price scheme. That could potentially devastate the real estate market five years from now.

The lending industry needs some simple regulation--some usury laws come to mind. It doesn't need any complex regulation. The loans weren't complicated.

[amir]

To the Democrats who think that Obama will do differently... keep dreaming...

[Dave]

What a joke. I hate the republicans but I will have no problem voting for McCain if she is the Democrat's candiate.

By the way Hillary, I cannot pay off the Porsche I should not have bought, will you bail me out?

[Michael Snyder]

The only comment Peter didn't post of mine was my one line opinion of Hillary Clinton. So I'll spare you that line, but this is proof of the "red backed hammer and sickle behind her head. This woman is a two faced socialist who would gladly transform the United States into a third world debtor nation to propagate her own agenda. Her swipe at Sen. Obama before the Texas primary was right out of the Dianne Feinstein play book and every bit as sleazy. I;m SO glad she headed east with her carpet bags full of stolen crockery. But in true Clinton fashion, this will provide some ink and a distraction from her own dysfunctional campaign.

[Dave]

Hey Lost,

No, I don't think that would be best. You should be responsible for your own investments in which sometimes you gain and sometimes you lose.

The reckless people involved in this (both the banks and the "homeowners") who deserve to lose money for their irresponsiblity, should lose money.

Perhaps next time, they will be more wise with their spending. Nobody forced them to buy an over priced home (often times at 100% financing) which led to higher and higher home prices. They chose to do so.
If they made a profit well then good for them. If they lost money, well then, deal with it.

It's not the end of the world. These people can sell their home, rent a new one and regroup. The government should allow the market to correct itself.

[Michael Snyder]

Lost in Deutschland
Once again...with feeling... This crisis was not caused at the consumer level and it will not and can not be corrected by actions at the consumer level. Calling this phenom a "bubble" is close; look at it like beating eggs. It looks like more & it's fluffy, but it's all air. The "egg value" remains the same. Lots of tiny bubbles have to burst for the economy to heal, kind of like an economic belch for relief to be felt in the market. The root cause is still the over leveraged positions that encouraged those ninja lending practices in the first place. You'll want to give the old WC a moment before you step in after that one is flushed.

[TrojanDLA]

The word "disgustingly ignorant" doesn't even begin to characterize how out of touch Hillary is with what is truly "wrong" with the economy. Her proposed programs does nothing to address the necessity of a price correction and attempts to make taxpayers relieve banks of their mistakes while punishing taxpayers with HIGHER taxes and oh yeah guess what, more slowed economy because higher taxes does not lead to capital growth. Just ask France or Canada.

Let the recession and correction run its due course, and any money the government intends on spending should be to spur "small business" growth.

[Truth2Pwr]

Hillary has no chance at all of getting elected. Hence her thoughts on a foreclosure plan carry about the same weight as mine. Which is probably a good thing since they reak of the kind of "Big Government" let's-solve-our-problems-by-creating-a-bigger-beauracracy-ism that Republicans love to beat the Democrats over the head with. And rightfully so.

[NoWayinLA]

puckhead: Alas, if only it were that simple.

The first step is figuring out what a particular home is actually worth, and its inherent risk.

The second step is figuring out who actually owns that mortgage. It was sold into a pool, and that pool has been sliced and diced so many times, nobody knows who actually owns what. Maybe nobody actually owns anything?

As if that isn't enough... now you have to figure out who owns the risk. The default obligation got turned into some arcane derivative product, which got sliced and diced even more, and traded multiple times in the shadow market.

This stuff isn't actually difficult to value... it's impossible, and quite likely, by design. It's like a giant shell game the financial wizards invented, and now that the game is up, they're finding out that there never was a pea.

[Josh]

This is why I didn't vote for her in the California primary. I was going to with a week to go, but then I found out about her initial plan to freeze ARMs for up to 5 years. That pushed me over to the Obama camp. Depending on what he proposes I might have to end up voting for McCain since this is my number one issue.

I recommend that Clinton scrapd her current bailout plans to try and keep home prices artificially high and call for increased incentives for first time home-buyers who were priced out of the market. This would help increase demand instead of having the government interfere with private contracts...a much better solution in my mind.

[Mark Too]

To the people saying that they won't vote for the democrats in general, or Hillary in particular, for proposing a $30 Billion bailout for homeowners in mortgages over their heads - the best I can say for you is you are complete morons.

What's your alternative? Vote for a republican? Take a look a what just happened, the Fed bought $30 Billion of Mortgage Backed Securities from Bear Stearns for $29 Billion. JP Morgan takes the first $ 1 Billion loss and the fed picks up the rest. This was done under a republican administration! The bennefit to JP Morgan will be much greater than the billion dollar loss that they will take on the deal. The got the rest of the company for $10 per share. Wall cheered the move. JP Morgans market cap. went up by billions after the news was announced.

Wake up fools! It just happened and no one is screaming about anything. This country is nothing more than on big kleptocracy. The whole deal was done in secret and very few of the details have come out. Where's the outrage? It's our money! It's already happened, fools.

[Lost in Ecuador]

Another question I have which is brought up by NoWayinLA's comment is: What does the road to "rational, affordable levels" look like?

This statement brings up a lot of questions. For starters, what's rational or affordable mean?

Won't the housing prices in large metropolises like Los Angeles always be higher than their national averages? Additionally, areas that may have been affordable to middle class buyers may no longer be so due to factors beyond real estate speculation (e.g., population growth and a limited housing stock)?

And how many people need to have their homes foreclosed and how many banks must fail before housing prices to reach their "rational, affordable levels"?

[Mark Too]

I've asked this question before and will try again!

On the Bear Stearns BAILOUT, who exactly, had the authority to approve this transaction? Was it Bush?, Paulson?, Bernanke? Exactly who is it that has the authority to pay $29 Billion of U.S. taxpayer money for mortgage backed securities that were somehow valued at $30 Billion.

I remember back in around 1980 when Chrysler needed a $250 Million loan guarantee from the federal government and how hard that was for them to get. The Bear Stearns deal was done out of sight over a weekend and there is no public outrage. The stock market rallies and everyone is happy.

Here's a quote from yesterday's homeowner bailout story:

"The Fed has recently taken a series of aggressive steps to assist financial companies staggered by the credit crunch -- including providing a $30-billion short-term loan to JPMorgan Chase & Co. to facilitate its purchase of struggling Bear Stearns Cos."

Why was it characterized as a short term loan? The federal government paid $29 Billion for those MBS's. Was the $30 Billion face value? Or did the Fed get $60 Billion in MBS's at a 50% discount or some such thing? Why don't we know the details? Why isn't the press asking any of these questions?

[sfvrealestate]

Thanks, puckhead and Lost in Deutschland. I, too, hate the banks, but let's get real: if they go under, we all go under. And M. Snyder, luv ya, but we're already a third world debtor nation.

[Raul]

Guys, guys: This lady is the real thing, this lady is the champion of the working class, She has been proposing a bail out since last year, because She just can not stand to see the value of Real State going down and down (her words). Just think about: If prices go down..... Rents will go down.... The working class will feel rich....And you know, it is all about perception, it is all about beliefs, and if everyone believes, that they are Rich, and with a little bit of Religion, and a little bit of Nationalism, we all will be voting Republican.

[tc]

I'm interested in learning more about HRC's foreign policy experience. There's a major story out about some troubles with her version of the Bosnia trip that she has held up as evidence of her pedigree. I'm confused as to why the LA Times isn't covering this issue that Hillary herself repeatedly brought to the voters' attention.

[buz]

Clinton makes me want to vomit. She will say/do whatever it takes to seize more POWER for her inflated ego. The whole situation with Wall Street being bailed out by the FED last week is equally nauseating. We don't need to prolong this illness any longer with half assed remedies and potions cooked up by politicians trying to get elected. Just get it over with. Puke/poop out the bad loans and foreclosures and start over from the beginning. We will all feel better.

[l.a.guy]

"The second step is figuring out who actually owns that mortgage. It was sold into a pool, and that pool has been sliced and diced so many times, nobody knows who actually owns what. Maybe nobody actually owns anything?"

I'd be curious how big of an issue that is. These were still investment banks and they must have some requirement to adequately document the mortgages that are backing the securities if for no other reason it would leave them open to a ton of lawsuits if the mortgages didn't exist. Daunting though it may be, keeping track of thousands of owners wouldn't be too difficult with the appropriate systems. Has anyone read an authoritative report as to how big of an issue this is?

"On the Bear Stearns BAILOUT, who exactly, had the authority to approve this transaction? Was it Bush?, Paulson?, Bernanke? Exactly who is it that has the authority to pay $29 Billion of U.S. taxpayer money for mortgage backed securities that were somehow valued at $30 Billion."

Well for starters the Bear-Sterns board has to approve it. According to the NY Times they're about to sale 39.5% of their stock to JP Morgan (evidently under Deleware law a corp can sale up to 40% of the shares in the company without shareholder approval). Presumably Bernanke and company have to approve the 30B guarantee. Now that Morgan announced a 500% increase in the purchase price it will be interesting to see if the Fed is still willing to guarantee the 30B. Some people think Morgan will have to eat more of the loss in order to get the Fed on board.

As for the Fed guarantee, my reading is that it's a 30B non-recourse loan for which JP Morgan is pledging 30B of Bear-Sterns most toxic assets. I don't think Morgan can just declare them all bad and send the Fed a condolences card that says "well we tried" and then forget about it. I assume they have to make an effort to pay it back, so it remains to be seen how much of that 30B is a gift.

[tew]

Well described Peter.

She's beholden to the banking interests as a New York Democrat, but needs to pump out the populist rhetoric to please the left she also needs.

The only path for her is to pander, deflect, and muddle a way to get taxpayer money to please both her banker funders and her lazy voters.

[tew]

Michael Snyder writes that Hillary Clinton "would gladly transform the United States into a third world debtor nation to propagate her own agenda."

Um, I am far from a Hillary supporter - there's no way I'll vote for her - but please recognize the irony that Bush *has* in fact already helped do what you say she *would* do. Have you seen the currency? The national debt? The overall world standing? The weakness in military recruiting? The money spent to support an misguided agenda in Iraq?

Anyway, this is a housing blog. Her proposals are terrible overall policy and unfair and the street level.

[Michael Donato]

The Real Estate Market is just like most markets, let it be and it will balance its self out over time. We add the word crisis to everything these days in order to get someone else to fix the problem. It's a sad thing to watch people suffer from loosing there homes, but had they not squandered there equity to begin with most would still be able to make there mortgage notes. If anything is to be done, those dishonest loan officers and real estate agents, the ones who lined there pockets with commissions, the ones we turned to help guide us through buying and refinancing processes should have there licenses taken away. What happened to that good old fiduciary duty?

We act like no one seen this coming!

[onelastcigarette]

tsk.

A homeowner bailout is coming from either presidential Democratic nominees. The full extent will not be determined until it is executed.

John McCain has policies that is the closest in philosophy as the current administration.

There are policies from both parties that tick me off. But I think deciding which direction I want this country to go is an easy decision.

[LeavinLA]

Mark Too: It has been reported. The Fed made a credit line available to get the deal done. And now it looks like the deal will get done at a more rational price for the BSN stockholders anyway.

[PNWTrojan]

When it comes to being a two-faced, duplicitous, self-serving politician...Hillary is NUMBER 1! Her husband proved to be untrustworthy, and a low-life Hill-Billy, and now 'The Queen INHERITS the Presidency'?? What type of a brain-dead, buffoon would go for that? Oh, yes...Hollywood's 'Elite' and the other 15% of the FREAK fringe Left....but NO moderate, independent, THINKING Democrat!!

[stop foreclosure]

A plan like this is a complete disaster for long term economic recovery, vis a vis the housing market.

The housing market needs to correct itself through the proven laws of supply and demand. Artificially keeping housing prices up (which will happen with a $30B injection) will drag out the housing crisis much longer than need be.

I find it funny that Clinton has $30B to bail out both:

1. Stupid lenders who loosened up lending guidelines to give anyone with a pulse a mortgage (even after credit scores indicated these people were bad at repaying debts)

AND

2. Borrowers who overspent, didn't do any research, and lied (stated income) on their loan applications

Natural economic forces, not a $30B handout, need to correct the housing problem in America today.

[Po Win]

Hillary Rodham Clinton's stance is not one that was pulled out of a magician's hat. World renown economist, Milton Friedman, could assert that. With a robust cadre of economic experts, herein lies her proposal. No doubt, all of the naysayers hold doctoral degrees in economics, right? If not, your opine equates to fertilizer when you attack an idea as if you had a scintilla of economic prowess. In short, you are misinformed and misanthropic

[mike k]

Never mind Hillary's foreclosure plan - what about her DISCLOSURE problem!!! Show us your tax return!!!!

[Mark Too]

Thanks for the reply l.a. guy. You didn't get my question answered though. I understand that Bear Stearns has shareholders and board of directors have to approve the deal. My question is, who has the authority to pledge the $30 Billion of taxpayer money?

Your answer was that presumably it was Bernanke and company. Does Bernanke and the other Fed Governors have that kind of power? Can they enter into an agreement with a private, unregulated company to guarantee a pool of bad loans made by that company? Doesn't anyone have any kind of oversight on this? The President? Congress? Anyone? Is there any limit on how much the Fed can spend on their own? Are there any restrictions as to who the Fed can do business with?

I understand that the entire pool of loans is not going to go bad, that there is some value in them. The problem right now is that there is no market for that kind of paper, and nobody knows what their true value is.

Our government tells us we don't negotiate with terrorists. Bear Stearns was allowed to be in a position where it could bring our entire economy to its knees and was left unregulated. Bears shareholders get $10 per share, JP Morgan was allowed to cherry pick Bears profitable assets, and the taxpayers got stuck holding a bag of trash. And the Fed has the power to do this?

[puckhead]

l.a.guy,

JP Morgan is on the hook for the first $1 billion in loses from the Bear takeunder, the FED is on the hook for the next $29 billion of loses. A third financial firm has been hired to manage the assets from Bear’s balance sheet and to dispose of these assets in the open market. It’s in the FED’s best interest (and taxpayers best interest) to create a market for these assets as to allow an orderly disposition of Bear’s assets. This will allow the FED to recoup as much money as possible and to limit their loses.

[MyLessThanPrimeBeef]

Lost in Ecuador, the short answer to your questions is that we must shrink our local housing prices like Shuars of Amazon (and I have great respect for them) shrink heads.

[MyLessThanPrimeBeef]

As for Hilary, let me just say this: It's disappointing to know Hilary is only proposing $30 billion. The man, sorry, the woman, is capable of $1 trillion plus bailout proposals.

[gerald]

I sold my house in 05 because I, and every other rational person, saw this coming. Have been renting ever seen. I am a lifelong Democrat and I don't believe in stupid, pandering, government bailouts of stupid companies or stupid people.

Now, the last bubble before this one was the dotcom bubble. Was there a government bailout? No. Did things go back to normal? Yes. Did some idiots lose money? Yes. Granted this problem is bigger because not everyone was invested in the stock market the way they are in the housing market, but this is good. The only way people will begin acting rationally when it comes to housing is if we let them learn a lesson from this. I think there are still way too many people thinking that as soon as we hit bottom we'll start re-living the bubble years. NASDAQ trades around 2300s, down from what the 4700s. Get real.

Obama does want to create a fund to help the people that were defrauded not the one that made stupid decisions. Hillary should.... I am in polite company, so never mind.

Go Obama!

[Po Win]

Hillary Rodham Clinton's stance is not one that was pulled out of a magician's hat. World renown economist, Milton Friedman, could assert that. With a robust cadre of economic experts, herein lies her proposal. No doubt, all of the naysayers hold doctoral degrees in economics, right? If not, your opine equates to fertilizer when you attack an idea as if you had a scintilla of economic prowess. In short, you are misinformed and misanthropic.

[John]

Great post Peter!

Way to throw the BS flag.

Thank goodness she's not going to be the next president, if this is indicative of her bad ideas, we'd be giving Zimbabwe a run for the money in terms of failed states by 2012.

[Hank Wang]

The foreclosure bailout plan is plain WRONG.

The foreclosures problem is a result of greed from few people: bankers with bad loans, borrowers buying when they shouldn't have or lying to get loans, investment companies and bond insurance companies misrepresenting the investment risks of real estate mutual funds.

The impact of this problem affects the whole economy. (The people who lose their jobs because consumers are buying less; The people who will be affected by problems related to smaller government budget; The regular American becoming less wealthy because the dollar is worth less - which mean that foreign goods and commodities such as oil will cost much more.).

How is using government monies to bailout foreclosures justified when the impacts to the average American are ignored?

[TWstroud]

Po Win must be en economist.

[subgenius]

l.a. guy & mark too...

The Bear Sterns (hereafter to be titled by the more correct B.S.) bailout via JPM was a last-ditch attempt to avoid the B.S. "ass-ets" being sold off on the market. This would result in them being truely "marked-to-market" and resulted in the real valuation of these assets being open knowledge. This would create a cascade of other banks holdings suddenly being re-evaluated to real, rather than wishful, values. This would result in many other banks reaching a B.S.-type position in short order and with such losses that the FED would be unable to engineer any successful bailout.

As an aside, JPM is on the critical list wrt these fictional valuations, so this B.S. bailout is an attempt to win by doubling down their bet. They are up a creek sans paddle anyway, and if this works they get out, if not they end as they would have anyway if B.S. had imploded as the free market should dictate.

[subgenius]

Also - remember the FED is a PRIVATE operation, NOT a part of gubermint... see "The Creature from Jekyll Island" for details.

[the problemwithcaring]

For those intersted in Obama's policy stance on the mortgage crisis and bailouts writ large need only look to Cals' comment on the Paulson bailout post -- right here on LA Land waaaay back on Feb. 20th:
-------------------------------------------------------

In the political realm..

I thought Obamas speech referencing the loan problem was much more conservative and balanced than Clintons pandering and dangerous overspending proposals.

Quote from his speech:
“Senator Clinton and I don’t totally agree on the best way to solve this problem,” Obama said. “She says we need to freeze the monthly rate on existing adjustable rate mortgages for at least five years. But here’s the problem. That will reward folks who made this problem worse and it will also reward folks who are wealthy and don’t need it – but it won’t just target the struggling homeowners who need help most. And on top of that, a blanket freeze like this will drive rates through the roof on people who are trying to get new mortgages to buy or refinance a home.”

His position paper:
http://tinyurl.com/2fcmrd

Posted by: Cal | February 20, 2008 at 01:36 AM

[the problemwithcaring]

The rhetoric here is lovely. Sorry to interrupt it all with fact. Obama doesn't support a government-funded bailout or a foreclosure rate freeze.

re-posting:
_________________________

On the freeze:
“Senator Clinton and I don’t totally agree on the best way to solve this problem,” Obama said. “She says we need to freeze the monthly rate on existing adjustable rate mortgages for at least five years. But here’s the problem. That will reward folks who made this problem worse and it will also reward folks who are wealthy and don’t need it – but it won’t just target the struggling homeowners who need help most. And on top of that, a blanket freeze like this will drive rates through the roof on people who are trying to get new mortgages to buy or refinance a home.”

From the Financial Times:
"Obama unveils radical mortgage plan “

By Jeremy Grant and Eoin Callan in Washington

August 28 2007

“Unscrupulous lenders who deceptively sold subprime mortgages to millions of Americans should be fined and the proceeds used to help bail out borrowers facing a wave of foreclosures, according to Barack Obama.”

“Barack Obama recognizes that the real victims in the subprime mortgage crisis are not the lenders, but the millions of borrowers who followed the rules and whose only crime was taking out mortgages that lenders told them they could afford.

“Obama will create a Foreclosure Prevention Fund to help people facing foreclosure stay in their homes and renegotiate with their lenders or sell their homes. The Fund will not help speculators, people who bought vacation homes or people who falsely represented their incomes.”

His position paper:
http://tinyurl.com/2fcmrd

Sorry all. Continue partisan ravings.

[the markster]

so....let me get this straight: you get rewarded for going into foreclosure and you get rewarded for being a low-income wage earner?

I'm shaking my head, I'm dismayed, the whole entire foundation of what I was taught and believe about America is crumbling, crumbling, crumbling

[Erik]

Let's call the bailouts what they really are: THEFT.

I pay my bills on time and buy housing I can afford. Quite frankly, I'm a chump. I should have bought a huge house and leveraged myself to the hilt. Then I can vote for a democrat or a republican who will tax other people to help me out.

By the way, those of you who love Obama or McCain should research what their going to do. All three candidates want some form of relief, wether it is for people or businesses, it is the same thing. THEFT.

WAKE UP People! We can't aford to ellect any of the canidates this time. We need a thrid party!

[dna]

what does hilary clinton want to lead?