Saturday Learning Series - Mechanics of the mortgage meltdown

Yale professor Douglas W. Rae takes a look at the system behind sub-prime mortgages and goes through how the mechanics allowed the whole thing to happen.  There is only a cursory mention of government involvement and a mere hint at the government mandate (related to the CRA).  Nor does the conclusion offered by a student that more regulation is the answer, address the government's role in the whole mess.  But the rest of the mechanics provide a valuable lesson in what happened.

Obama's shot in the dark election offering

President Obama has to come up with something better than 1 to 2 percent of GDP growth in 2012 and better than 8.75% or higher expected unemployment in order to win re-election next year.  Expect his team to come up with something that will not be painful to taxpayers, not painful to the debt, but offers a lot of free money to a supposedly disadvantaged group that may represent a very significant, and very worried portion of the electorate, and to do so about a year from now.  This may be his best chance at re-election, but it won't be without risking significant harm to the nation.

Mortgage Forgiveness Horror

Ed Morrissey has a piece at Hot Air today about an Obama August surprise:

http://hotair.com/archives/2010/08/05/is-obama-about-to-forgive-billions-in-mortgage-principal/

Rumors abound about how the government is going to force Fannie Mae and Freddie Mac to forgive mortgage principal of underwater mortgages to the tune of $800 billion. That is indeed a horror on so many levels I don't even know where to begin.

Mortgage Foreclosures: Merely Delayed

Back in April I had meant to write a column about mortgage foreclosures and the effects of the Democrats not really solving the problem but merely delaying it.  But I didn't write it, so it's too late to say 'I told you so'.

Dogged by Leading Role in Mortgage Meltdown, Andrew Cuomo Personifies Democrats’ Reversal of Fortune

Dogged by Leading Role in Mortgage Meltdown, Andrew Cuomo Personifies Democrats’ Reversal of Fortune.

With despair gripping New York Democrats over ethical scandals claiming Governor David Patterson, Rep. Charlie Rangel (D-NY), and Rep. Eric Massa (D-NY), New York’s Attorney GeneralAndrew Cuomo cuts a heroic figure as the presumptive heir to the governorship.

But catching up with Cuomo is his relationship with the mortgage meltdown that nearly destroyed the American economy. Appointed by Bill Clinton as secretary of the U.S. Department for Housing and Urban Development (HUD), Andrew Cuomo has been called “the father of the subprime crisis” for the policies he orchestrated.

It was Cuomo’s directives that mandated HUD to vastly increase the amount of risky home loans bought by quasi-governmental housing giants Fannie Mae and Freddie Mac. Now, Cuomo may be haunted by his tenure as HUD secretary, where he planted the seeds for the nation’s housing collapse.

This is rich. The New York Times brings down Patterson to get a winner like Cuomo on the ticket, only to discover that he too, might be unelectable.

Maybe if the Democrats started thinking about substance over style, and that character matters, they might not be in the same pickle they found themselves in back in 1994. Enjoy the brine guys.

Unintended Consequences (Part 1 of 3.5 trillion)

From Reuters, more proof that it's amateur hour in Washington D.C.:

More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.

Dann Adams, president of U.S. Information Systems for Equifax Inc, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.

He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year.

"I'm trying to find optimism in these numbers, but I'm pretty hard pressed to do that," Adams said, despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner.

You know why the numbers continue to get worse? Because the Democrats announced they were going to help those in trouble. So if you were in trouble on the verge of foreclosure, wouldn't you stop paying to qualify for assistance and spend your money on other things - either loan repayment or purchases it doesn't matter.

Unintended consequences. The Community Reinvestment Act all over again. I've become convinced that liberal dogma is the equivalent of insanity in the sense that they try the same action again and again and expect different results. That's insanity. What they end up with is yet another tangled mess that won't get solved until the Republicans are re-elected and forced to look like the bad guys for cleaning up the liberal mess.