Sen. Bunning on the housing bill: 'Unpopular,' 'unusually bad'

Sen. Jim Bunning, formerly of the Philadelphia Phillies and now of Kentucky, receives special attention around here because he was the first U.S. senator to find fault with the housing bill that is dominated by tax breaks for home-builders.  Today Bunning explained his objections to the bill in detail. Excerpts:

"This is an unusually bad bill, and I have opposed it from the start.  The course it has followed almost guarantees that it will be filled with the worst kind of gimmickry.  And it is.  The Senate may be the world’s greatest deliberative body, but this bill is anything but the product of deliberation.  It is a jumble of disjointed ideas, unlikely to solve the crisis at hand, and it’s unpopular.

"It turns out that the American people don’t like the idea of bailing out banks and their neighbors who gambled on home prices.   The voters understand what is going on in Washington, better than we do. ...

"Another provision that deserves far more scrutiny is the $4 billion in community development block grants that will be allocated to state and local governments to buy foreclosed properties.  To begin with, this program is very poorly managed. The Wall Street Journal called it among the worst-run programs in Washington, and there is a lot of competition for that title."

"The White House called the program 'ineffective' just two months ago, and when the HUD Inspector General testified before Congress in 2006, he explained that his agency had recently indicted 159 individuals and recovered $120 million of misappropriated funds. GAO also has criticized the targeting of grant recipients, which is a polite way of saying that the money is going to those with political connections and influence in local government.  Adding money to this program is risky at best. 

"Let’s not have any illusions.  This extraordinarily unwise grant of taxpayer money is really just a bailout for banks in disguise.  It goes to states, but the ultimate beneficiaries will be banks that made risky loans.  Instead of selling foreclosed properties on the open market, these banks will have the luxury of selling to local officials with whom they may already have a relationship.   These officials will be buying properties not with their own funds, but with 'O.P.M.'  O.P.M. stands for 'other people’s money.'  And, in this case, the O.P.M. comes from you and me, the American taxpayer, and millions of unborn Americans that we are saddling with even more debt.

"Another provision that could benefit from more thoughtful deliberation is the $100 million of spending on counseling. ... We also don’t know all that much about the non-profit groups that will get the money.  Are some of these groups funded mostly by credit card companies?  If so, they will have a clear conflict of interest.  Maybe they will actually advise people to abandon their homes to foreclosure in order to pay credit card debt.  That would make the foreclosure situation worse, not better."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: 1966 file photo of Jim Bunning, via AP.

Comments

[Robert in Palm Springs]

A voice of reason in the wilderness of stupidity. By the way, where does Congress think it is going to get the money to bail out the real estate market when we are already $9 trillion in debt and showing no inclination whatsoever to reign in spending money we don't have?

The government is making the same mistake individuals made--not living within their means. Until they get it together and stop deficit spending, our entire nation just gets weaker and weaker, poorer and poorer. Lead by example, not by throwing borrowed money at all the problems

[JR]

Never thought I'd agree with Jim Bunning...but...HERE, HERE, Jimmmy!

[l.a.guy]

I may move to Kentucky just so I can be represented by a Senator I respect.

[Joseph...The Real Estate Guy]

Good posting Peter!

I agree 100% with your assessment. Cities buying properties? ha, a new government mandate?

I hope the President will veto.

Investment Banks should take the hit for being so stupid!

Is the government bailing out K-Mart, Nextel/Sprint, etc.?

Give me a break! Need an aspirin!

[Mike Napolitano]

Peter, Good post. I agree that this bill is a facade for taking action. There are a couple of provisions that might make sense and even work, but only the market will cure itself. Business Week and Fortune both got it right in the Fall of 07 when they said "The Smart Guys Got It Wrong Again". Wall Street MBAs and their new business models were probably the same geeks who predicted the Tech Economy built on stock prices and not profit & loss.
This legislation will only cost you and me, the taxpayers money. Tell your Senators NO!

[firesale]

Worth repeating myself...

BUNNING FOR PRESIDENT!

[original thinker]

That a boy, Jim! Still throwing straight, still throwing hard.

"First U.S. senator to find fault with the housing bill." Are there any others? I wish Bunning would step
out nationally on the issue. At a time like this the American people outside Kentucky sure need some
blue grass under their feet.

Who's representing us here. I wrote a letter to our California senators in protest of the bailout and
receive a form response assuring me they were working hard to secure one for the American people.
Which American people are they referring to.

I think our representation is totally lopsided on the bailout. You might say (if I may paraphrase Churchill),
that never have so many been represented by so few. I hope Sen. Bunning will continue to make loud noises.
Don't shut-up now, Jim. You're the only voice we've got.

[Valley Observer]

Around Christmas there were a lot of for sale signs and then they disappeared, apparently as houses were taken off the market. Now they're back, along with unsigned houses that seem to be unoccupied with closed curtains and unmown lawns. Looks like the two categories combined are now ~10-15% of the houses in this Lake Balboa part of Van Nuys that for a decade or two has been right in the middle, average in price compared to the Valley or the County.

[SoCalRealEstateNews.com]

Sen Bunning may be right on in the parts of the bill that he criticizes. Too bad he doesn't also propose alternatives that might be more helpful.

How about a bill promising long-term control of deficit spending. Like coupling a line-item veto for the next President with elimination of Congressional earmarks. That would bring down interest rates, government waste & the deficit simultaneously.

There probably are positive things Congress could do to help with the liquidity crisis as well. One reason the market's falling is it's getting harder every day for anybody to get a loan.

Washington mismanagement had a lot to do with getting us into this mess (See "How We Got into this Mess" in SoCalRealEstateNews.com)

It would be helpful if our leaders in Washington could put their heads together to come up with some rational ways to keep us all from falling off a cliff.

[eternal summer]

where do boxer & feinstein stand?

also, i thought we voted in term limits at one point so we wouldn't have these lifers....they seem to be out of touch with reality....

[Rip N Tear!!!]

I have been insulted for the last time. A realtor thinks I am going to pay $600,000 for a 600 sqft "condo conversion" in Santa Monica??

From this point until 2010 I will respond appropriatly to every post by simply saying....

-We will pay the price for Greed, but we will not count the cost.

[Cal]

OT:

I was perusing some links tonight and I noticed that Default Research had posted their March foreclosure filings, as far as I know they are the first to do so for march:

March-08 : 10,846
MONTHLY CHANGE: 40.95%
YEARLY CHANGE: 178.60%

http://www.market.defaultresearch.com/market/ca.php

Averaging Q1 07: 3426
Avergaing Q1 08: 9475

Considering how well foreclosures are selling I'd hurry up and foreclose too. Might as well get your money back sooner rather than later.

Dataquick should have the "official" foreclosure numbers out in a week or two but this gets you in the ballpark.

[Winfield J. Abbe]

Great post Peter Viles. The American people have totally lost control of their government. Instead of having "representation", as our ancestors violently fought so hard for in the American Revolution over 2 centuries ago with England, two political parties and just over 2 centuries later and we seem to be right back where we (or they) started. Let me give you an example of public moneywaste right here where I live in Athens, Georgia. The local government runs a multi million dollars public housing program for the "poor".
Housing units are scattered around town but some older ones are on a street called Rocksprings, behind the older high school. A few years ago the powers that be decided they did not like the looks of these public housing units and decided to sort of redirect one's eyes for a moment from the housing units to a brand new multi million dollar, decadent, TAj Mahal, administrative building next to them. This building is not just all brick, but multi colored and multifaceted brick. It was so expensive to build the local newspaper carefully avoided mentioning the cost or who paid for it, but it was obviously in the millions of dollars and paid for likely by the duped federal government, when a $200,000 plain Jane building to keep the rain and thieves out would have done job just as well. It is totally out of character with the neighborhood. This is an example of how local yokels waste federal money, money the federal government prints, but does not have, and how this further bankrupts all of us, speeding the arrival of the ultimate and inevitible economic crash to come. Look at all the affordable housing units they could have constructed with the wasted millions of dollars if they truly cared about the "poor", rather than seeking to misuse the law and violate the federal fair housing law by prejudicially preventing the only truly affordable housing: manufactured homes. I doubt if this story is unique. I has likely been repeated in every city of the U.S. It is further proof that we are all on the way down the mountain our ancestors created, but a cowardly, ignorant and lazy good for nothing populace, with a television propaganda mentality, has gang raped to exhaustion. The end can't be far away. One cannot continue to "print" wealth with paper money. We obviously learned nothing from the lessons of Germany or Italy or South American or the former Soviet Union. Remember how one day a few years ago the old Soviet Union suddenly ceased to exist? It was bankrupt wasn't it. So are we, the U.S.A.

[Thought Police]

Winfield, don't drink and blog. Thank you.

[tew]

"GAO also has criticized the targeting of grant recipients, which is a polite way of saying that the money is going to those with political connections and influence in local government." which is YOUR polite way of saying that the program is full of fraud and corruption.

[Michael Snyder]

Does anybody remember, "Bob & Carol and Ted & Alice"? Somehow it seems synonymous with, "Congress & the Lobby and Investment Banks & the Ratings Agencies". Just one big happy foursome looking good in the neighborhood.

As the "happy couples" gather for yet another photo opp http://www.bloomberg.com reports, "Citigroup, Wells Fargo May Loan Less After Downgrades (Update3)". " April 8 (Bloomberg) -- Bank holding companies including Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. have the thinnest safety cushion against losses in seven years.

The margin may erode further in coming weeks. Credit ratings on $704 billion of bonds have been cut this year following the collapse of the U.S. housing market. Sheila Bair, chairman of the Federal Deposit Insurance Corp., said last week that downgrades may compromise bank capital ratios enough that some of the largest institutions will no longer be considered well capitalized."

Meanwhile, back in the north forty, " April 9 (Bloomberg) -- Citigroup Inc. is in talks to sell $12 billion of loans at a loss to Apollo Management LP, Blackstone Group LP and TPG Inc. as part of an effort to shrink the bank's balance sheet, a person briefed on the matter said.

A sale to the private equity firms would shield the bank from further declines in the value of the debt, said the person, who wouldn't be identified because negotiations are private. The loans are part of the $43 billion in financing that Citigroup agreed to provide for leveraged buyouts last year before credit markets froze and saddled the New York-based company with hard- to-sell assets."

Call me "stupid" (and I'm sure a few of you have) but what could be the motivation for folks like Blackstone & Apollo to place such a bet when they're already up to their eyeballs in red ink? Is there no practical limit to how high you can leverage a dollar?

I was at a party the other night & in the course of the evening I was stunned to realize that in a gathering of over a hundred people perhaps two had a clue what was happening in the economy. I'm not talking about the level of discourse enjoyed on this blog, I mean just an awareness beyond the price of gas.

If the demographics demonstrated in this group are indicative of the awareness of most educated people's, then Jim Bunning's stand is indicative of the country's awareness & involvement in seeking a solution to this crisis. Please note, the gathering I am referring to was populated by an over thirty, college educated, entertainment business kind of a crowd. Folks you'd expect to have a handle on what was effecting their lives.

Given the pervasive lack of awareness & involvement at the grass roots it's small wonder the incestuous relationships between the rating agencies and the holders of investments they grade has been allowed to flourish. Add to that the lovey-dovey relationship that Wall Street has with Congress and it's a good thing you can't wire transfer STDs. What it has transfered is our nation's wealth into the hands of a "privileged few" in America and they've sold the rest to the very people who've vowed to destroy us and our way of life.

Kudos to Jim Bunning for his courage and honesty. Shame to California's politically correct bought & paid for liars we pay to ignore our common sense in the Senate.

[jpermo]

There is another kind of program that I've become involved with where a city (Long Beach, in my case), makes a silent 2nd loan to close the gap on housing prices that exceed median income for the area. I may very well be a latent socialist for all I know participating in this but I fail to find a reason why this does not make more sense than letting cities allocated taxpayer funds for outright purchase. In this program, I get approved for a CALHFA loan than is stringently vetted by the banks' underwriters, CALHFA and the city. The remainder of the purchase price is made up for by the city's 2nd and a few other, smaller, sources. There's no interest on the 2nd, and the city takes the hit should the vlaue of the property plummet in this market. The purchase price and the re-sale price is tied to the same formula - HUD median income for the area. That means I cannot sell the property for a big profit, in some cases the city will simply purchase back the property in order to keep it on the Affordable market. In this way, the first time buyer is not exposed to market risk and the city keeps a certain number of units available for low or mod income first time buyers. It differs from the LAHD program in that specific addresses can be 'set aside' for this market and the properties can be kept on the Affordable market for 30-40 years. I would rather see the 4 billion in grants go to something like this for cities, it seems to me better opportunity for stewardship of the monies since municipal administrators would be inclined to maintain the solvency of their program rather than just handing out funds to cronies.

[Lou]

Feinstein and Boxer are both jokes. They have no idea whats going on in their own state and the unaffordabilty of housing for the MAJORITY of their constituents.

[go]

I think bush's latest help for homeowners (financial backing for banks lowering homeowners' principal on homes near foreclosure) is better than house/senate bills (too much help to builders, etc).

[Kathy]

Rather than the city of Los Angeles buy properties, why not have the city rescind the approvals they gave to developers to tear down rental properties to put up condos that either haven't sold or are in foreclosure, and license them to rent out those units. That alone would put thousands of units back on the rental market, which would ease the vacancy rate and make homes available for those who have been foreclosed.

[JohnnyB]

It's amazing that he's the only vote against this bill.

If this handout to the mega wealthy, mega homebuilders, who made record billions in profits off of over-priced homes built by (mostly) under-priced illegal immigrant workers, it would be more than a shame it would be a sham.

These mega builders still have mucho $$$ and with proper belt tightening and realistic home price reductions, will be just fine.

It seems more likely that these bailout proposals have been added to this bill in order to raise the builders stock prices for an interim period of more artificial profit taking - which is more like an insider trading scheme.

However, if these retro tax breaks actually pass, they not only get the insider trading profits, they get direct taxpayer dollars to reward their previous gambling loses. In common sense parlance, this is criminal. In D.C parlance, just the grease de jour.

The more that citizens pay attention to what’s going on in Washington, the more they realize how much influential lobbies not only exert undo influence with suitcases of private cash up front to our “representatives”, but how that cash up front is actually a secured, government-backed guarantee that they will get it back in spades at our expense.

All the lobbyists and all the “representatives” should just bunch together on the front of the Washington monument for a mass group photo, have helicopter Ben fly the photographer up (way up) for the wide shot, say W E A S E L, whereby they all unanimously flip the middle finger to the American people… and then call it a day. Then, whenever a citizen decides to write their “representative” or seek justice for the middle class, they can just mail back this group photo.

[Cindy]

I volunteer for a consumer group. We were already getting thousands of complaints a year on shoddy construction and breach of warranty, and rigged arbitration procedures with these co's. Then predatory lending and the housing bubble came along. Now more complaints have an element of mortgage fraud, too. Some big national builders are under investigation for it, as well as securities fraud because this mess burned their shareholders and investors too. Builders opened in-houes or affiliated lenders. And, like other lenders, they have been implicated in appraisal fraud and other schemes.

These industries contributed to the artificial bubble and its predicted bust. It is patently unfair and unconscionable that the govt would even consider rewarding these businesses now with a bailout. Tax payers who were responsible and took no part in the housing mania would have to pay for stupid and even criminal activity. I believe the bailout plea is so a few more wealthy CEO's can gather their millions and get out quick before they, too, are left without a chair when the music stops again. Whether congress is entertaining this industry's whining out of ignorance or corruption, it tells me many in congress are unfit for office. Bravo that at least a few of them don't fall for this bailout.

This industry made billions during the boom and should've planned for inevitable slumps that the industry is known to have. Where's the "personal responsibility" when it's corporate America who made mistakes, not just consumers?

BTW consumers and consumer orgs were warning of this mess years ago. Law enforcement ignored it until banks and investors got burnt. If something had been enforced back then, we would not have the economic damage now. The FBI found that 80 percent of mortgage fraud is done by industry insiders. This can't be blamed on dumb consumers entirely when the industry--which knew what it was doing--was so obviously involved and necessary for it to be carried out.

[KDH]

Ugh, eternal summer, please get your civics right. We have term limits in the California State Legislature. Not that its helped us...the lifetime staffers that move from official to official and their lobbyist friends are really running the show up in Sacramento now. In the federal Congress, the Senators and Representatives can run and win as much as they want. Remember Strom Thurmond, he was in the Senate for what...50 years or something?

As for the topic at hand, I never thought I'd be so appreciative of a Kentucky Senator. All this bailout insanity is ridiculous. If the Fed and the SEC had done their job and enforced their rules to begin with, we wouldn't be here. But now to provide tax breaks to builders to encourage them to build more homes while we've got a glut of homes pulling down values of houses already on the market? No way!

[MyLessThanPrimeBeef]

In the desert of Namibia, there is one remarkable plant, Welwitschia Mirabilis. What makes it remarkable is that in the Namib desert where it grows, rain falls at less than 1 inch a year; yet the plant can live for more than 2,000 years because it conserves, wastes not and maximizes the use of that 1 inch of water.

And that could be a great model for us going forward, facing the toughest challenge, in the words of Well Fargo CEO and more recently, the IMF, since the Great Depression, with the daily spectacle of the most arrogant and rich people you can imagine panhandling at the Federal Reserve discount window, a noisy and crowded area now known as The Tin Cup Alley.

That's my subprime beef story of the day.

[NoWayinLA]

Jim Bunning owes his insight into this mess by virtue of being the only member of Congress who knows and understands mathematics. After a youth spent scrutinizing ERA, WHIP, SLG, and OPS, things like median income and DTI ratios are laughably simplistic.

It's too bad the rest of Congress was standing in front of a mirror practicing their "lie with a straight face" skill (aka "spin") while Bunning was out learning something productive.