Flip-flop in progress? Paulson now 'flexible' on bailouts

It appears Treasury Secretary Henry Paulson's brief tenure as the administration's chief critic of foreclosure bailouts is coming to a quiet end.

You will remember it was Paulson (pictured) who called bailout plans a "nonstarter," saying "absolutely not" to talk of direct government aid to homeowners. Well, that was then.

This is now, from Bloomberg News today: "Treasury Secretary Henry Paulson indicated the Bush administration is willing to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages. 'I think you will continue to see flexibility as we learn and go forward,' Paulson said in an interview with Bloomberg Television in Beijing."

More: "Paulson's housing comments are a shift from last month, when he said proposals to use government funds were a 'nonstarter'' and played down concern about homeowners whose houses are worth less than what they owe on their mortgages."

Diversion: I knew this little dance reminded me of something, and then it hit me: The very end of one of the greatest scenes in Hollywood history, the Joe Pesci "Funny how?" scene in "Goodfellas." The part of the scene everybody remembers is when Tommy DeVito (Pesci) browbeats Henry Hill (Ray Liotta), demanding: "Funny how??? I'm a clown??? I amuse you??? Funny how???"

DeVito ends the scene by saying: "I wonder about you sometimes, Henry. You may fold under pressure!"

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

Photo: AFP /Getty Images

Comments

[Too Bad -Pay Me]

Joe Pesci himself in that classic scene is a lot like the liar loan homeowners. banks and 6%'s. The character was a rude deadbeat bully that was so use to stiffing his waiter on the tab he thought he was entitiled to run up bills he never planned on paying... now, that's funny!

[jb]

I will never own a home. I hate my government and want them all to die.

[RealtorDaveE]

Wierd. We actually reported on this before it happened, early yesterday morning.

Trouble is, it was intended as an April Fool's piece!

http://socalrealestatenews.wordpress.com/
2008/04/01/major-housing-breakthrough-near/

It's actually good news to us. We need politicians and bureaucrats to become more pragmatic and work together before this thing totally spirals out of control.

BTW, I'm not your normal Realtor. And criticizing me because of my career is about as Neanderthal as criticizing Obama because of his ancestry. I would hope for better from LA Times readers.

[Cal]

I thought when I read the Barney Frank bill it had the most chance of passing, it has a provision to make lenders take less (85% of currently appraised value I believe it is), keep owers chained to their homes, and provide government "help".

Plus I think the downside risk is small, if it is 85% of appraised value.. then the downside risk to the FHA is 5%, or they could possibly be taking the new 85% price and guaranteeing that 80% (68% of appraised value).

People need to remember that FHA is only insurance, someone has to hold the paper and there are fewer and fewer willing to do so. And if it is Fannie/Freddie buying up the Barnie Frank short refi paper, it is going to be that much less money left for the purchase market (higher interest rates).

They are trying to a put a floor to the downside, I think people overreact to the effect these things will really have on the market.

[RealtorDaveE]

Oops. Somehow I put up the wrong link to our "psychic" April Fools prediction of today's Paulson news in my 12:18 p.m. post above.

You can either use that link but scroll two posts down to the April 1 post , or just click here to go to the specifc April Fools' post:

http://socalrealestatenews.wordpress.com/2
008/04/01/major-housing-breakthrough-near/

[arroyogrande]

"not your normal Realtor. And criticizing me because of my career is about as Neanderthal as criticizing Obama because of his ancestry"

Yes, it is EXACTLY the same. Those poor Realtors, we know what pain they had to suffer through slavery and Jim Crow laws.

Now, back in reality, criticizing a Realtor when he/she gives advice on "now is the time to buy a house" could be better likened to criticizing a used car salesperson saying "now is the time to buy this car". You get a commission on a *sale*, not on giving good advice...so it makes sense for the public to be a little skeptical (like they would be with a used car salesperson).

- arroyogrande

[Fred]

The funny thing is, this will cause banks to have no choice but to offer double digit interest rates on all new loans, and thus, home prices will fall even harder!

Just a bad, bad, bad idea for all parties involved.

[John]

The WSJ had an interesting piece about people putting off retirement today because they were losing value in their home equity and investments.

How does the approaching retirement of the baby boomers affect the housing market? Is it going to be a moot point as they stay in their jobs longer, or are they going to panic and try to get whatever equity is left and move to a smaller house in a cheaper state before the bubble bursts completely?

Given the lack of patience in this country, I'm guessing there could be some serious additional panic selling in the next few years.

[areles]

RealtorDave, my experience in life is that when one must issue a disclaimer in advance, that which they're disclaiming against is usually the case. "I'm not a racist, but..." "I'm not a homophobe, but..." "I don't approve of cannabilism, but..." What always follows the "but" is affirmation of the point denied.

Just sayin'.

Additionally, comparing distaste for a profession to racism is rather silly, don't you think?

[puckhead]

Any bloggers who are tax experts want to respond or correct me on my earlier post regarding tax carryforwards or are we too busy screaming hysterically, “…………..THAT’S NOT FAIR!!!!!!!!!!!!!!!!”).

[Lou]

This is the result of Bush's horrible foreign policy. He doesn't have the politcal capital when he actually wants to do the right thing and the Democrats are in the wrong. All these spineless Republicans make me sick. And these conservative nutjobs criticize McCain when he is one of the few politicians to get it right on housing.

[IToldu2CashOut]

I have a name for this act:

No Fool Left Behind.

Having said that when you look at what this planned action will actually do it will probably not be enough to help CA that much. Our houses are just too expensive and overpriced. Whats 15k going to do for a 700k house that is 60% overpriced. Sounds like just another gift to the least deserving. Maybe it will make a difference for other parts of the country though where houses aren't so ridiculous. I just don't get where this money comes from.

[RealtorDaveE]

areles & arroyogrande,

I'm not saying that Realtors have suffered anything like minorities. So far, NAR's been able to hold the lyncings down. I'm saying there are crooks and honest people in virtually all professions, from clergy to law and even to real estate.

Unfortunately, it's way too easy to get a real estate license in this state, and last year Arnold vetoed a law that would have made it tougher. Lots of people get into it for the money, & lots more do when the good times roll.

In a normal market, which hasn't happened yet this millennium, most of these newbies are out of the business in a year or two. Not so in the good times.

There are honest Realtors out there, and we don't lie to our clients to make a sale because we're trying to build a long term business.

Please review my post on "How We Got into This Mess" & see if we don't have more in common than you might expect:

http://socalrealestatenews.wordpress.com/
2008/03/29/how-we-got-into-this-mess/

[Laker]

IToldu2CashOut,
The bailout money comes from either:
1) Taxes that we pay (and will pay more of in the near future)
2) printing new money. If they give $15,000 to every buyer or/and builder or foreclosure sale.3 million foreclosures multiply by $15,000 that is 45 billion dollars....divide by about 2 trillion of flowing cash. That is 2.25% of inflation yo just ADDED in addition to the current inflation.
Look at this another way, now your $100 in the wallet actually worth about $98...