Bush threatens to veto Frank mortgage rescue bill

News item: President Bush today promised to veto the Frank mortgage rescue bill now before the House, saying the proposal to write down, refinance and guarantee mortgages "will reward speculators and lenders” who have suffered because of their own foolishness.

More, from The New York Times: Democratic Rep. Barney Frank, anticipating a veto pledge, said on Tuesday evening that a veto would signal that the president was abandoning efforts to help homeowners and would mean that "he’s stopped trying to govern."

Analysis: The president is right, up to a point. The bill would reward speculators and lenders  (It would offer lenders a better price for their distressed mortgages than the private sector is currently offering. That is a reward of sorts. It would also offer speculators new, cheaper mortgages -- by far a better deal than the private sector is currently offering them. Again, a reward of sorts.)

The larger question, though, is whether the Frank bill would work and how much it will ultimately cost taxpayers.  The Congressional Budget Office has said it won't put a floor under housing prices and won't stop a recession from happening, but it will prevent some foreclosures. 

My suspicion is that the ultimate cost to taxpayers of Frank rescue package will be significant, but will be dwarfed by the larger mortgage-related bills coming due soon. I'm talking about the likely cost to taxpayers of cleaning up the mess that Fannie Mae and Freddy Mac are very busy making right now. Again The New York Times: "... some financial experts worry that the companies are dangerously close to the edge, especially if home prices go through another steep decline. Their combined cushion of $83 billion — the capital that their regulator requires them to hold — underpins a colossal $5 trillion in debt and other financial commitments."

Remember, folks, the mortgage market in this country was effectively nationalized over the past six months. There's Fannie and Freddie and the FHA, and that's about it. The market is groaning under the weight of bad loans, and the odds are increasing that you and I will ultimately own them, whether we want to or not.

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

Comments

[gary]

can bush become any more useless as a human. it would also help homeowners caught up in the meltdown. he is so corrupt morally and intelligently. he cares for his banker buddies and thats it. shows what buying a yale and harvard degree will get you.

[jmart]

Anybody see this as a 'double-win'? No bailouts and the President is made to look bad in the process...

I must say that the news about Fannie Mae and Freddi Mac is disconcertin - it just means we'll foot the bill.

[Laker]

Peter, the fact that Freddie and Fannie are about to collapse is another reason why NOT to support the Frank bill that will add bad loans to FHA. Bush is 100% right, and i hope he follows with this and VETO the bill. I'm sure the whorehouse will pass the bill on Wednesday, so the only hope now is Bush.
Based on my mortgage research for the last couple of months I agree with you Peter. Freddie & Fannie are the only players left...nobody else has the money or the desire to give money for depreciation asset. FHA is not giving money, they just insure loans...
They will all go bust by simply recognizing that the loans that are currently given still based on inflated valuations.

Gary, you are upset that Bush doesn't want to help you keep your house that you bought for $1,000,000 and Option ARM payments of $3,000 but want the government to give you new fixed rate loan, reduce the loan amount, and let you pay $2000 fixed?
You gotta be kidding me.
You and the other loan owners have two options:
1) Mail in the keys and go look for a rental.
2) Stay in the house, rent free until the sheriff comes and evicts you out of the house...then you go and look for rental.

I'm sure that at some point, you will find a rental that will be vacated by a responsible renter that will go and actually buy your house for half of what you paid or less!

[Jack]

While I'm no fan of the Frank bill, I find it beyond absurd that Bush is lecturing people on fiscal responsibility after pouring hundreds of billions down Operation Iraq Rathole and mortgaging the country's future to finance his foolishness. Our children and grandchildren will be paying for his financial follies for decades upon decades.

[Frank]

Bush is the worse US President in my lifetime and it's clear that he doesn't care about the country or how he's viewed. He is "owned" by the transnational elite and the neocons and simply does their bidding. Their objective? Lower the basic wages of the American so they can compete in the new global market. It seems to be working as the dollar deflates and depreciation sets in to the US economy.

[Arti]

In eight years of Bush administration, I do believe this is the first time he has taken a brave, contrarian decision that is actually totally right. Good for him, the prez finally got something right.

[farinhite_451]

FOUR MORE YEARS!

just kidding.

[happy jack]

Now I am beginnging to like Bush

The day that there is a HUGE tax increase to pay off these bad debts and more lose their homes because of it is the day riots never seen before will happen across the nation in every major city.

The rich will be dragged from their homes and hanged. Their homes will be burned to the ground, and those who are supposed to protect and serve will be right along the rest of the middle class and poor helping out with the carnage, we will become another dafur, somalia.

I am rich and I really hope that day never comes, and as long as these bills never pass we as a nation will be safe.

The minute all hope is lost ? I am off to Europe.

[gary]

nice try laker, i am doing fine with my mtg, job and assets. unfortunately I know too many people who bought the bad houses and are turning what was once a nice neigbborhood into a vacant home sellathon. i live in a ok area of OC but the ugly is catching up quickly. so next time you want to trash someone assume we are all not trailer trash like you.

[gary]

to happy jack and laker..................why you sound so stupid is because you all want to not help anybody to avoid us taxpayors getting stuck. well guess what mr and mr bush wanna be, if they dont do anything then more houses will go back to the bank where more banks will want a bailout where more taxes will be paid to help the banks. why is it none of you understand by now that if bush is for something, it must be bad for everybody but the bankers. anything sifting thru your brains yet????? there is always another side to the FREE MARKET prevails world. I give you as exhibit 1: Bear stearns.

[PNW Trojan]

Gawd, when we are ALL sick and disgusted with Bush and his puppet masters, up pops the Beacon of the Dems...Blarney Frank! Wow...what an awe-inspiring leader....we, are a nation of LOSERS! Why is politics the bastion of vermin? Is there no genuine, patriotic American moderates? Just freaks from left and right. If we didn't want to evict all those incumbents, and send them to experience unemployment, we'd not vote...but we DO want to send as many as possible, to UNemployment! Join us???

[jb]

Just one more reason why:

I LOVE W!!!!!!!!!!!!!

[Robert Laughing]

Ok, lets have a National Monument of the most despicable, vulgar, stooge-like politicans. Bush, Clinton, Cheney, Kennedy, Frank, now...add your contributions....

[Edison Franklin]

FOUR MORE YEARS!

I'm NOT kidding!

[Valley Observer]

I wouldn't characterize it as housing becoming nationalized, although I see your point, Peter. The banks, mortgage companies, raters and so-called regulators destroyed the secondary market through their own actions and inactions, killing the goose that laid the golden eggs by poisoning the market with junk. Fannie and Freddie are in their position now by default.

[gary]

hey PNW trojan...............fastest way to fix it all. Ready, DONT EVER VOTE FOR AN INCUMBANT. Never Never Never do it. If we can recycle the trash ASAP then new blood and brains may prevail. But like the good sheep we are we just keep reelecting the garbage starting with brain dead bush all the way down to our local yoyo. I DONT EVER VOTE FOR INCUMBANTS ON ANY ISSUE. And as for this upcoming election, GOP had their shot and screwed the pooch completely. A democrat sounds find by me and BTW, during the time when clinton was in and the world was suppsoed to end because we have a liberal in the white house, well I made more money then then during the great GOP controlled house, senate and white house when baby bush was in. I will risk a democrat over bush III, err , mccain anytime.

[amir]

Bush is right. However, knee jerk liberals will pile on.

Now, if only he was more fiscally conservative during the last seven years...

[yours truly, Johnny Dollar]

You go to Vegas; you bet the farm on black;
it turns up red. You go to the Casino boss
and beg for your farm back. No, you can't.
You lost the farm.
People who did not buy into ARM-no money down
will not bail out people who did buy into ARM-no money down.
You rolled the dice; you lost.

[Bots]

Hallelujah!
You lost me there for a while, Georgie, but you're back!
Veto this BULL$#!^ bill!

Gary,
I couldn't understand your last incoherent ramblings. You should try to scrape up a few bucks for better alcohol. What, you lose your H2? Miss those good ol days of '05?

[IToldu2CashOut]

If even a moron can understand why a housing bailout is bad, why can't the media?

[Bill]

Sorry, I guess I missed the part in econ class where they mentioned it was somehow the Federal Government's responsibility to bail out people who bought houses they couldn't afford and never should have been given loans to buy.

Every foreclosed home brings down the price of homes in that market, making them more affordable, allowing people who have been priced out of the market to buy.

It's called a normal economic cycle, folks.

I don't see why falling home prices are an issue unless you were planning on selling or have enough debt that you were counting on that home equity loan to finance your lifestyle.

I commend the President for being the only one realizing that some modicum of financial responsibility needs to be maintained.

[liz]

I have disliked Bush for a very long time (I did vote for him the first time and that's it) but the last few days he has been saying the right things--- a lot to late--

Although VETO AWAY Bush!!! At least something. He should have started vetoing a long time ago.

Did W suddenly wake up as a conservative 7.5 yrs to late...idiot!!

I'm a libertarian, no longer a member of either party. I always was for small gov. and personal responsibility but neither party represents that and neither party will in 08, 09 and onward.

[MyLessThanPrimeBeef]

My theory is that all men and women are created equally virtuous.

It's the office that is corrupting.

That's why I am so hesitant about sending good men and women like I-am-always-cool-McCain, O'babamama and I-am-a-natrul-born-futures-trader Hilary to the White House.

If some people must occupy it, I sugest we go with the Dual Monarchy system of Spartus or the two Augustuses and two Caesars invention of that Dalmatian cabbage farmer/Roman emperor, Diocletian. Let them share the burden of the office. Diffuse the smell of money a little bit. A Round-Table Pizza type of leadership council is also a good idea.

Oh, I am with W this time. Go, presidential veto!

[Harry How]

A 5 year old has a larger vocabulary than the man. I cringe just listening to 5 seconds of a Bush press conference.

The banks and homeowners and anyone involved in mortgages are getting crushed, and must now pay the price of their greed.

For the first time in 8 years I agree with this Bush decision. I will still cringe when I hear him speak,

[Jenna]

Well just like a broken clock, he's gotta be right at least a couple times. Hate to say it, but I agree with W. We can't afford the Frank bill, plain and simple. And what do you do when you can't afford something? You don't buy it!!