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Wednesday, July 23, 2008

No Veto For Dodd/Frank

According to Politico, the White House has pulled its veto threat for the Dodd/Frank Housing bill.

A landmark housing bill heads to the House floor after winning President Bush’s support Wednesday despite Republican complaints over billions added by Democrats to assist low-income families and communities facing large foreclosures.

Here is the key portion of the bill.

The underlying housing bill authorizes up to $300 billion in new loan guarantees for the Federal Housing Administration to help at-risk homeowners refinance and avoid foreclosure. On top of this, the Congressional Budget Office estimated Tuesday that Paulson’s Freddie-Fannie rescue plan could cost as much as $25 billion over the next two years. And the addition now of an $800 billion debt ceiling increase is a reminder of Washington’s own troubled mortgage, already hovering near $9.5 trillion.

Now, what this article doesn't say is that this bill will also provide $300 billion in guarantees so that banks can sell off their most troubled loans. As much as this is a bailout for troubled borrowers, it is just as much a bailout for the banks holding the loans of these troubled borrowers. Now, the Federal government will guarantee the mortgages of borrowers who frankly have no business holding a mortgage to begin with.

I have already pointed out that in my estimation that this bill is nothing more than a sophisticated corrupt quid pro quo between Chris Dodd, Bank of America and Countrywide. We already know that earlier this year Bank of America bought out Countrywide. We know that Bank of America bought them for a depressed price because Countrywide was holding onto billions of dollars worth of bad mortgages. Many of these mortgages will now be eligible to be moved onto the books of FHA. We also know that Chris Dodd received multiple "sweetheart loans" from Countrywide. Less reported is that Bank of America has been funneling campaign cash to the average of about $1000 per week for about a year and a half to Chris Dodd. What has been reported only in the D.C. Examiner is that proprietory documents suggest that Bank of America wrote significant portions of this bill. As such, there is rather strong evidence that the sweetheart loan and campaign cash were used so that Bank of America could have Chris Dodd create a bill that would be favorable to their buyout.

Yet, no one is reporting on this. This quid pro quo is now in its final stages. To add insult to injury, this bill will also bailout Fannie Mae and Freddie Mac. As I pointed out earlier, not bailing them out is NOT an option. They are both far too vital to the entire real estate market to fail. If they are not financially viable they must be infused with cash. That said, they are structurally flawed as socialistic monopolies. By giving them a bailout without a significant restructure, all the government is really doing is the equivalent of feeding a crack addict with more crack.

This bill is an unmitigated disaster and not only is no one opposing it, but it is being supported overwhelmingly. When a bill this corrupt gets overwhelming support, it speaks volumes about the systemic corruption on both sides of the aisle.

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