Obama to Order Banks to Cut Mortgages

Because the best thing to do for the economy right now is to meddle even further with the banking system, and keep banks from actually recovering their debts. The fact that the President of the United States and be so completely, utterly ignorant of economics just astounds me.

From the New York Times:

The Obama administration on Friday will announce broad new initiatives to help troubled homeowners, potentially refinancing several million of them into fresh government-backed mortgages with lower payments.

Yes, because there is an abundance of money that the government has access to so it can back these mortgages.  And because preventing banks from getting paid back money they loaned out is great economic policy.

The escalation in aid comes as the administration is under rising pressure from Congress to resolve the foreclosure crisis, which is straining the economy and putting millions of Americans at risk of losing their homes. But the new initiatives could well spur protests among those who have kept up their payments and are not in trouble.

Gee, why would people who have been responsible and actually paid their mortgages be upset with having their tax money pay for the mortgages of other people? They must be greedy, hatemongering teabaggers!

The Washington Post also reports:

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower’s income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.

I cannot think of a more textbook example of fascism than this. We literally have a public official who is going to use government power to dictate what companies can charge for their product.

The Obama Administration claims that its motivation for this “reform” is to alleviate foreclosures causes by increasing unemployment. As the National Review Online points out, if Obama was so concerned about unemployment, perhaps he shouldn’t have led the charge to push through health care legislation that places a massive hardship on employers:

Heavy-equipment manufacturer Caterpillar “said that its first-quarter earnings will be hit with a $100 million after-tax charge under tax law changes attached to the new health care reform legislation.”

AK Steele Holding Corp., “the third largest U.S. steelmaker by sales, said it will record a non-cash charge of about $31 million resulting from the health-care overhaul signed into law by President Barack Obama. The charge will be recorded in the first quarter of 2010.”

Valero Energy “will take a $15 million to $20 million charge to second-quarter earnings for the same reason.”

Medical-device maker Medtronic “warned that new taxes on its products could force it to lay off a thousand workers.”

Ed Morrissey at Hot Air predicts how Obama supporters will defend this economic power grab:

Obama’s supporters will give two answers to this argument.  One, they will say that we need to provide a safety net to those less fortunate, and that the action plan will rescue the housing values of all Americans by limiting foreclosures.  The second argument is false, since we haven’t been limiting foreclosures at all; we’ve merely been postponing them, and not doing that terribly well, either.  The $50 billion will get spent and most of the homes that benefit it will still get seized, which is about the clearest example of throwing good money after bad one can get.

As far as the “less fortunate” and safety nets argument goes, most Americans agree on providing basic safety-net programs for the poor and disabled.  We don’t agree on providing them for people who took risks and chose poorly in doing so.  It creates a moral hazard where bad decisions come with no consequences, and therefore more bad decisions follow.  Better to let people fail and remain free to learn from their mistakes than to cocoon them from the consequences of their actions.  Instead, Obama proposes to do exactly what got us into this problem — floating money on even more debt to artificially inflate the housing markets for just a little while longer.

And that last point is a very important one that has been overlooked by the media. This is the exact same meddling that caused the housing bubble. Despite what the left wants to pretend happen, this whole mess was brought on by liberal agencies pushing to give home loans to people who couldn’t afford them. When those people started defaulting, Democrats worked to prevent banks from foreclosing, which collapsed the banks, as they could no longer recoup their losses. Now that the bank collapse has depressed the rest of the economy, so that fewer people can keep up their payments, what is Obama proposing to fix it? Further government control over how the banks operate and give loans.

I am becoming more and more convinced that Glenn Beck is right, and this is the Cloward-Piven strategy at work.


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