Welfare Added to Bailout to Appease Liberals

by Hans Bader on September 25, 2008 · 38 comments

in Bailout Watch, Economy, Legal, Politics as Usual, Precaution & Risk

The cost of the $700 billion bailout bill, criticized as unconstitutional by legal scholars, is rising, as Congressional leaders demand new handouts for deadbeats (and left-wing groups) in exchange for passing it (ignoring cheaper solutions to the financial crisis).  Now, in addition to welfare and affirmative action, there will be foreclosure “relief” at taxpayer expense.  The government is going to use its role “as the biggest mortgage holder in town” to give special breaks to borrowers who are behind on their mortgage payments, rather than to stem the financial crisis.

“Democratic demands that Congress be given greater authority over the bailout and that the government be required to help homeowners renegotiate their mortgages so they have lower monthly payments already have been accepted in principle. Under the bailout bill, which will let the government buy huge amounts of toxic mortgage-related assets, ‘we’re now the biggest mortgage holder in town, and we can do serious foreclosure avoidance,’ [liberal Congressman Barney] Frank said.’”  (Moreover, irresponsible borrowers will be able to seek not only a reduction in their monthly mortgage payment, but also a cut in the amount they owe on their mortgage, getting part of it written off at taxpayer expense).

But the whole point of a mortgage is that lenders can foreclose and recover the value of the home if the borrower doesn’t pay.  Government limits on foreclosure will further undermine confidence in financial markets.  And many of the borrowers who are behind on their mortgages now lived it up several years ago, taking out mortgages with low-introductory payments during the housing bubble (allowing them to finance lavish consumption, like buying fancy cars), in exchange for higher payments later on that they should have known they wouldn’t be able to afford.  They’re going to be bailed out by taxpayers, including people with fixed-rate mortgages who paid more in mortgage payments than they did during the housing bubble, but have lower mortgage payments now (because their payments haven’t risen).  There’s nothing fair about that.  Most of the people who are defaulting now aren’t victims — in fact, some of them lied about their income to get mortgages on large houses that were bigger than they could afford in the long run (while people who bought homes using fixed-rate mortgages and a large downpayment ended up living in small houses that they could actually afford).

Senator Hillary Clinton wants the taxpayers, and risk-averse people who took out fixed-rate mortgages, to subsidize people who took out adjustable-rate mortgages.  In today’s Wall Street Journal, she says that people with adjustable rate mortgages should be able to keep their introductory low interest rate forever, even though no one would ever have offered them a permanent rate that low, and even though the introductory adjustable rate is lower than the rate they would have received on a fixed-rate mortgage.  (When I bought a home, I had the option of either a fixed 5-percent mortgage, or an adjustable-rate mortgage with an introductory rate of 1 percent that probably would have risen to 7 percent or more by now.  I took the fixed 5 percent rate).

Clinton also advocates a temporary moratorium on foreclosures, so that deadbeats can keep living in the big houses they can’t afford.  That’s a windfall for risk-takers and gamblers, at the expense of people who are thrifty and prudent.

flenser September 25, 2008 at 6:25 am

Barney Frank is one of the principle culprits behind this mess. Why is he involved in "solving" the problem? It's like letting Al Capone write the law on bank robbing.

Jarl Osbiorn September 25, 2008 at 7:17 am

Yes, it's all the liberals' fault. How dare all these "gamblers" take advantage of the innocent, defenseless financial institutions! It's a plain and unambiguous fact that the borrowers had each and every one of these lenders over a proverbial barrel and forced them to lend money they didn't want to lend. Or not…The ultimate responsibility for this "crisis" sits squarely on the shoulders of lenders: they made risky loans; pawned off the risky loans as infallible securities to anyone they could entice; and leveraged themselves well beyond "what they could afford" [to finance lavish consumption, like sub-letting 10 floors of the Time Warner building in Manhattan]. If the lenders had bothered to analyze the loan applications with any kind of scrutiny, they'd have seen the red flags.A final note: of the people I know personally who are having serious mortgage-related payment problems, all but one of them are DIE-HARD, BUSH-LOVING, LIMBAUGH-WORSHIPPING CONSERVATIVES. And the funny thing about that is – they are clamoring like mad for the "liberal-appeasing" relief you so disparage. I don't like the idea of giving away $700 billion to anyone for any reason–especially where it absolves corporations of the consequences of their abysmally deficient governance–but don't try to characterize this mess as the big bad government pulling a Robin Hood. It's preposterous.

Nancyf September 25, 2008 at 11:15 am

Guess we WILL have socialism after all, huh? LMAO!

Nancyf September 25, 2008 at 11:16 am

Business people are against socialism unless it's to THEIR benefit. Does anyone see the hypocrisy in that besides me???

fedgovernor September 25, 2008 at 1:43 pm

Wwhat do you think the $700 billion is? That's welfare for the Ivy League yacht crowd.Kind of late to be worrying about how much welfare is getting pushed into this bill.

Don R. September 25, 2008 at 3:56 pm

Heres another conservative who was offered a choice of An adjustable rate or fixed rate, I took the fixed rate simply because it seemed the right thing to do. I never asked the government for anything but a fair shake on my taxes. On the other hand I don't feel I owe anyone a bailout.

jdc September 26, 2008 at 12:27 am

On this "bail-out" issue, once again, why don't we find the criminals and make them pay? Isn't that what would normally be done to any person who lies,cheats and steals from others? This is what has been done, no denying. The wall street players have had a good run on our dime. Now it's time to pay for the crime. It's all smiles as long as they're making BILLIONS. But don't ask them to "bail-out" their own sinking ship when things get tough like any small business owner would have to do. They have not run things on the up and up, now they should pay up. Pretty simple equation that seems fair to me. And probably we should close the legal loopholes that allowed this theft to go on as well as any other questionable practises like "projecting" income, where when a big company states it will make such and such amount, but when they don't it is claimed as a loss and they don't pay taxes. This adds up folks. Who makes up the difference? It takes alot to run a country, but maybe not a lot to ruin one.

Steve September 26, 2008 at 5:04 am

Everyone seems to be missing the fact that we don't need this bailout. What we need is to fix the problem. The single biggest culprit is last November's Mark-to-Market, SOX rule 157. The liquidity problem can be fixed by suspending rule 157 for the bad debt instruments–from around 2003 to 2006–and then providing insurance for banks and commercial lending institutions against those assets. The companies that have the bad debt on their books should also be required to commit by contract to hold the debt instruments until maturity.This would return confidence to lenders in the collateral value that the debt instruments represent, and allow them to start lending again.The suspension of 157 would sunset in about 3 years, and not be re-implemented until it is rewritten. We need no socialist/mercantilist solutions.

mark September 26, 2008 at 6:04 am

Amen brother! What is really taking place is the market is adjusting to the elimination of corruption from the system. We must push forward, accept things as they are and deal with it as it comes. New local economies will develop, a correct real economy, not a false one that was created by the politicians and corporation with their fingers on the buttons.

scgopher September 26, 2008 at 6:55 am

25 years ago I financed my home purchase through an assumed ARM loan that I maintained for approximately 15 years. As it began to creep up in rate approaching the current rate I refinanced using a fixed mortgage rate and subsequently paid off the loan. While I have an MS degree in finance, the signs were very evident for a high school graduate to take the action I did. I have little time for normal folks not to know what kind of loan they have, and absolutely none for those who were allowed to purchase homes beyond their capability to pay off. This bail out is ridiculous for many good reasons, and as a taxpayer we have the wrong folks trying to solve it. The federal government is the most to blame for this mess for not having sufficient financial policies and supervision to allow the state we are in. My junior senator, DeMint, has been trying for years to stop pork-barrel spending (read vote getting) with attachments to larger bills but most of our politicians are fixated on ensuring their political survival. If we, as taxpayers, don't protest very loudly, more of the same will occur.

chi-con September 26, 2008 at 8:36 am

On this "bail-out" issue, once again, why don't we find the criminals and make them pay?I agree… Impeach Dodd, Frank, and Obama.

Bob September 26, 2008 at 11:43 am

I agree… Impeach Dodd, Frank, and Obama.ESPECIALLY Barnet Frank!! What a joke!!

Bob September 26, 2008 at 1:35 pm

Forget the $700,000,000,000 bail out just take the $85,000,000,000 promised to AIGA bailout plan that makes sense…I’m against the $85 BILLION bailout of AIG. Instead, I’m in favor of giving $85,000,000,000 to America in a “We Deserve It” dividend. To make the math simple, let’s assume there are 200,000,000 bona fide U.S. citizens, aged 18+.Our population is about 301 million counting every man, woman and child.So, 200,000,000 might be a fair stab at adults 18 and up. Now, divide 200 million, 18+ adults into $85 billion – that equals $425,000.00 each!Yes, my plan is to give that $425,000 to every adult as a “We Deserve It” dividend.Of course, it would NOT be tax free. So, let’s assume a tax rate of 30%.Everyone would pay $127,500.00 in taxes. That sends $25.5 billion right back to Uncle Sam! It also means that every adult 18+ has $297,500.00 in their pocket. A husband and wife would have $595,000.00!What would you do with $297,500.00 to $595,000.00?Pay off your mortgage – housing crisis solved.Repay college loans – what a great boost to new grads.Put away money for college – it’ll really be there.Save in a bank – create money to loan to entrepreneurs.Buy a new car – create jobs .Invest in the market – capital drives growth.Pay for your parent’s medical insurance – health care improves.Enable deadbeat parents to come clean – or else.Remember this is for every adult U.S. citizen, 18 and older (including the folks who lost their jobs at Lehmann Brothers and every other company that is cutting back) and of course, for those serving in our Armed Forces.If we’re going to re-distribute wealth let’s really do it! Instead oftrickling out a puny $1,000.00 “economic incentive”.If we’re going to do an $85 billion bailout, let’s bail out every adult U.S. citizen!As for AIG – liquidate it.Sell off its parts.Let American General go back to being American General.Sell off the real estate.Let the private sector bargain hunters cut it up and clean it up.We deserve the money and AIG doesn’t. Sure it’s a crazy idea, but can you imagine the coast-to-coast block party?!How do you spell Economic Boom? W-e D-e-s-e-r-v-e I-t d-i-v-i-d-e-n-d!I trust my fellow adult Americans to know how to use the $85 Billion “We Deserve It” dividend more than do the ‘geniuses’ at AIG or in Washington, D.C..And remember, my plan only really costs $59.5 billion because $25.5 billion is returned instantly in taxes to Uncle Sam. Good idea? I think so.==============LOL..It actually is a good idea!

Sick of Lies September 26, 2008 at 2:18 pm

pure genius, Bob! I never thought of it like that!

Holly September 26, 2008 at 5:36 pm

Do the math Bob! $85,000,000,000 divided by 200,000,000 is $425.00.Even if the math were right, the plan would just promote laziness, corruption and entitlement along with a host of other unwanted character traits. If you were to just hand a huge amount of money over to people without them having to work for it (welfare), most would choose a life of "luxury, indolence, amusement, and pleasure" (quoting Thomas Paine who was referring to the corruption in Europe at the time of the American founding). We don't need anymore of that in America. That's what got us into this mess in the first place (people choosing to live above their means- and lenders willing to let them because they profited as well).

The Truth September 26, 2008 at 7:27 pm

Blowjob Clinton, Nutjob Pelosi and Blarney Frank are the main causes of this financial crisis which started with the Clinton administration putting pressure on Fannie and Freddie to basically give money away to people unable to pay for houses. When Republicans tried to do damage control in 2003, the libtard socialists raised hell. Waterboard Pelosi.

bj1 September 27, 2008 at 12:29 am

I just hope 'we the people 'can stop this mess before our esteemed electeds finish us off.. They seem to have a death wish for America. I would dearly love to get rid of the whole crew and TRY to find some electables who are for us and our country. bj1

anglesa61 September 27, 2008 at 4:04 am

We, the citizens of the United States MUST STOP this Bailout. When these CEOS walk away with multi-millions in severance, it is we that pay for it. Bring their millions back into the Company, sell off the company assets and let them go bankrupt like we would have to do.This is NOT helping the American people. It is filling the pockets of those in Washington and the CEOs who already have millions, it is letting them keep those large severance packages, and we will be the ones to pay for.Instead, divide the $700 billion between the taxpayers, let us get out of debt, pay off our absured mortgages, loans, credit cards, etc., even pay our taxes on it. Then the US would garner the taxes we paid on what would be given to us, and we could be debt free. That is the most sound idea to me.Most of our Senators and Congressment are NOT watching out for our pocketbook, they are watching out for their own. Most of us do not have LARGE savings accounts or investments and what we do have is loosing ground very quickly.DO NOT LET THEM PASS THIS BILL TO BAILOUT LEHMAN BROTHERS AND WALL STREET. IT IS UNCONSTITUTIONAL and will be nothing short of another Depression for us.

anglesa61 September 27, 2008 at 4:08 am

I totally agree. If we continue to bailout these large companies who pay their FAILING CEOs millions, even when they have failed the company and we, the citizens, then our Country will be in an even bigger mess.I agree with We The People Deserve It – Give it to the American People. We've given enough what with IRS taxes, taxes on groceries, medicines, everything we buy. It is time they gave back to US>

anglesa61 September 27, 2008 at 4:13 am

AGREED – we need to find a way to get rid of the Pelosis, the Franks, the Obamas and the Clintons. Even Bush who wanted American to be a homeowner. IF they had stopped at Americans and legalized aliens, then we wouldn't be in this mess. What about all the people who lost their homes, AFTER losing their jobs, AFTER 9-11? Where is the help for those folks??? They can't buy a house again for at least 3 years because of their foreclosures. If we are going to do this for those in foreclosure now, then we should reimburse those who have lost homes during the past 7 years.THERE IS NOTHING FAIR ABOUT THIS BAILOUT PLAN. It only helps those in DC and we need to CLEAN OUT THE Senate and the Congress and Start all over.In fact, it is my opinion that those in Washington can only serve two (2) terms, just like our President. We should NOT allow them to become career politicians, liked the Kennedys, the Birds, the Thurmans, etc.

2000retired September 27, 2008 at 6:35 am

I, a retired teacher, with a very modest income have been responsible about my past and present mortgages. I only bought what I could pay for and got a fixed rate with the option to pay extra principal which I did. It is unfair that responsible tax payers are expected to bailout the irresponsible. I support a workout where the irresponsible must be held accountable and face the consequences with much less government involvement than what is proposed. I could not afford any house until I was past 50 years old because of some economic misfortunes in my own life. No one bailed me out. It does not kill a person for their home to go back to the mortgage company. They can recover. My sister did. These companies who sold to bad risks and the homeowners who bought more than they could afford out of envy or the "I am entitled" sickness need to pay the consequences. That is how we learn.

Sue A. Masten September 27, 2008 at 2:29 pm

The Democrats have been dishonest about their role in this. They point the finger to Bush and the Republicans when they should have a major overhaul in self reflection. Because of the Dems and the famous Community Reinvestment Iniative loans were given to minorities, illegals and low income families who would never be able to pay a mortgage. It was all disguised in the goverment Mafia Fannie mae/Freddie mac and their cronies who benefited immensely in this mandate of government enforced socialism. The republicans failed in not forcing putting this danger to the American people and being the keepers and whistle blowers. Shame on them. Now the same people who are intricately involved in all of this self promotion ie ASCORN will be able to continue business as usual. No wonder franks and dodd and pelosi were having such as hissy fit when McCann came to DC. They were being discovered and their practice as usual with pork barreling was threatened as they continued to look after their own interest even in this time of dire economic threat to the people they are here to serve. Vote the hypocrites out of office. unfortunately, the american public doesnt see the deception of the democrats and want to continue to put all of the blame on the wrong party.

Sue A. Masten September 27, 2008 at 3:43 pm

we as individuals have been just as reckless with our futures as the politicians have been. we are responsible for our own actions and shouldnt expect the government to bail us out. if you have large credit card debt and havent been saving then that is your fault and no one else. Our grandparents knew better because they lived the great depression. QUIT Whining and insist on real accountablity from our government. The Democrats created this debacle and dont want to take any responsiblity for it. What that means is that they will continue with the current goverment pork barrelling as usual and our representatives will expect us to bail them out. NO ACCOUTABILITY. as a citizen it is our responsiblility to forget our party allegiances are and DEMAND a real accountablility from the House of Representatives to explain to us the truth, not party spin. Senators Todd, Franks and Pelosi were having major brain infarcts over this for a reason, they are the source of all of our problems and now are trying to pork barrel the bail out for their benefit not ours. ASK the Questions why are they funneling funds to the same groups who helped cause this mess ACORN!!!

Sue A. Masten September 27, 2008 at 3:58 pm

READ your history. Carter implement the Community Reinvestment act in the 70's. Clinton supercharged it in the 80's and with the muscle arm or Rubin and janet Reno forced banks to lend to minorities, illegal alians and low income groups. Banks were not allowed to ask these groups for ID, credit checks or income checks. It was considered discriminatory. Fannie Mae and Freddit Mac was chartered to come in and buy these loans. The CEO and cronies all benefited unitl the SEC discovered the accounting fraud and fined them 500 million dollars. Bush, the Republicans , Greenberg and many others called the alarms and introduced legislation to increase the scutiney over these practices however it was the majority Democratic congress who voted against any oversight. Now they want to blame the current administration. I fault the republicans and Bush for not screaming loud enough and letting the public know. But know the Democrats, Dodd (can you say Countrywide bene's) and Franks and Pelosi want to point the finger the other way when they should be looking in the mirror. Now they want to give ACORN the very group who help to bring all of these minorities, illegals and low income groups to have loans they couldnt afford or qualify for more money to continue doing the same old bull. forget about your party allegiance. Throw all of the bums out. Obama is no better. He is aligned with ACORN, and votes 100% with his party- no change here. It is imperative that we go beyond our party beliefs and try to get to the truth. Why is it no one in the Democratic party is asking for investigation in how we got into this mess???

Sue A. Masten September 27, 2008 at 4:08 pm

My brother had no job no credit and didnt actually own the property he managed to take a loan of $350,000 on. They didnt ask him for proof of anything. He much to my dismay had no plan on paying the mortgage, how could he he didnt have a job. he got about $150,000 out of the deal. Do your research- look into the Community Reinvestment Act iniatiated by Carter in the 70's, supercharged by bill clinton in the 90's. Rubin the Secretary of Housing changed the rules to force banks to make the sub-prime loans. Dont just listen to the talking heads of the media but do your own investigation. You have to ask yourself WHY ARE THE DEMOCRATS ALIGNING WITH BUSH NOW///.// They have added every pork barrel hope into this bailout like ornaments on a christmas tree. ask yourself why are they trying to give ACORN- a community activist group that has multiple charges of voter fraud and actively involved with Fannie Mae / Freddie Mac in giving loans to individuals who can never pay. Dodd and Franks want to guarantee groups like these 20% of any profit to continue doing the same things that got this country into this mess in the first place. AMERICANS need to stop listening to the career politicians and media and educate themselves.

Sue A. Masten September 27, 2008 at 4:22 pm

Correction- Clinton supercharged the Community Reinvestment Act in 1999. Because of the majority Republican Congress, Secretary of Housing Rubin changed the requirements forcing bank to lend to minorities. Janet Reno was the strong arm. If banks didnt loan to these groups it was considered discriminatory and the banks were threatened with credit downgrades if they didnt cooperate. Each citizen should take it upon themselves to do their own research and not party doctrine. Fannie Mae / Freddie Mac CEO cooked the books and got their own $90 billion payout in the setting of the SEC fining the company $500 million in fines, Dodd and Clinton cronies got sweet deals with Countrywide and now the foxes are in charge of the hen house with this bailout. If we as citizens dont demand accountability from our representives instead of just listening to media spin then we deserve to pay $3000 for every man woman and child as a cost for being stupid.

Bonnie September 28, 2008 at 12:19 pm

all this is foretold in the Bible…..and Barack Obama may well be the forerunner, or even THE anti-christ…….be afraid, be very very afraid !! This is all going to get worse, then, suddenly better, then………………!!!!!

Boomer September 29, 2008 at 3:44 am

The fact of the matter is that we have a corrupt government that pressures lenders to take risky loans to benefit their political positions and special interest groups. Neither party can dodge the responsibility for this mess. Why don't the call it what it what it really is which is Socialism or for those of you who don't know what that means look up Communism for the definition.

anglesa61 September 29, 2008 at 11:36 am

IT IS TIME SOMEONE IN WASHINGTON AGREES WITH THE LITTLE PEOPLE.Let these companies file for Bankruptcy just like we would have to. Anything paid out within the past 1 year can be pulled back in by the Bankruptcy Trustees (i.e. golden parachuts packages)Make the CEOs repay their BIG salaries, sell off the assets, and let the Financial markets start over again.I, FOR ONE, am sick and tired of the Washington people who think they know EXACTLY what we want.Remember, an election is coming up, we will be voting on a President, on Senators and Congressmen. Maybe it is time we VOTE OUT the lifetime members in DC.I AM, I can guarantee I will not vote for anyone from my State who has served more than two terms in DC.Maybe the rest of you should do the same.

anglesa61 September 29, 2008 at 11:40 am

AMEN to THE TRUTH. We need to get rid of Pelosi (she needs to be DETHRONED), get rid of Clinton, Frank and Paulson. Send them back to their own states so they won't continue trying to run our personal business.

JM October 1, 2008 at 7:43 am

Every time congress passes a spending bill, less and less of the money goes to the stated purpose. There are more crooks in Congress that are defying the rule of law and the Constitution. These thieves should be fined and jailed, to make room for honorable leaders. I am completely disgusted with the left wing loonies that are stealing from hard working Americans and taking money for themselves and to buy votes. We are at the end of America.

Mike Curtis October 2, 2008 at 9:37 am

At the bottom of this problem is the fact that people sold land at a speculative price, and now that value is less than is owed for the land. In other words the colateral on the mortgages is now worth less than the debt. Is it fair to say that the person that loaned money should not get their money back? Why couldn't anyone buy a piece of land to put their house on without paying the speculative price? Why does the price of land go up and down so much? We could say that those who sold land should give some of the money back, but no one ever paid extra when the land increased in value.The only long term solution to this problem is to declare land as a common opportunity and lease it to homeowners, farmers, industrialists, etc. That way the rents can be adjusted as the land becomes more valuable. If it weren't for the price of land, neither this problem nor any recession/depression would have ever happend.If anyone is interested, I could say a lot more

l cuevas October 2, 2008 at 1:50 pm

lets not forget that all these mortgages or products,as you financial gurus call them when it suits your purposes to make them sound legitimate were designed to sell even if valueless at great profit to the industry,and not only that but pushed by expert professionals bankers and realtors that reassured people at every step that all was as it should be,well if a consumer is hurt by a product purchased legitimately is he punished,or do,oh my god,regulatory organizations such as the bbb rush to the consumers aid,guess what?this whole thing is a scam,and if you chose a 5%fixed rate nobody cares good for you.

Payday Loan Advocate October 27, 2008 at 9:42 pm

Because of the different problems that our country is facing today, the government officials are making solutions to solve the problems in our economy. The problems facing America’s economy are not exclusive to only the United States. The International Herald Tribune features an article about the credit crunch in Europe. This article centers on a small business owner outside of Paris, Dominique Boudier, who runs a printing company. Small business just like hers depend on credit to be able to keep afloat, especially since she faces a 60 day lag in receiving payment from many of her clients. Currently, her creditors are cutting their offerings in half, largely due to her supplier’s credit insurance companies insisting on a lending freeze. Her bank, along with many others are sending all their liquidity to the European Central Bank, instead of investing into other banks and back into the fragile economy. As banks begin to fail and liquidity dries up, credit begins to disappear. Similar to the Federal Reserve Bank in the US, the European Central Bank issues fiat money. Fiat money is currency that is backed with credit, and as governments can’t guarantee the value of said currency; its value diminishes rapidly, resulting in enormous inflation rates, which we are seeing in the global credit crunch. The consensus of many is that the proper manner in which to curb these symptoms is a stronger banking system. While most people hang in the lurch, payday advance loans will be readily available, as most people will not be able to afford to wait for the banks to sort themselves out. Post Courtesy of Personal Money StoreProfessional Blogging TeamFeed Back: 1-866-641-3406Home: http://personalmoneystore.com/NoFaxPaydayLoans……Blog: http://personalmoneystore.com/moneyblog/

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