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Thursday, September 25, 2008

Hillary Clinton's False Populism

A corrossive effect often not noticed during times of crisis and turmoil is how easy it can for the right person to exploit the situation. It is very easy to demonize a class of citizenry during times of great economic chaos. Now that there is a strong chance that the Wall Street types will get some sort of a bailout, you can bet there will be someone pleading for the same consideration for the borrowers. Hillary Clinton appears to want to be just that person. She proclaims that we need to make sure to keep people in their homes. In other words, those that can't afford to pay their mortgage should be given a mortgage they can afford even if the market would never give them such a mortgage. First, it appears that Hillary Clinton was napping when the Senate passed Dodd/Frank because making sure that borrowers stayed in homes is exactly what that bill did. More than that though, Hillary Clinton appears to believe that allowing Wall Street off the hook for bad financial decisions is not enough. She would like to let irresponsible borrowers off the hook as well. Let's examine her plan.

I've proposed a new Home Owners' Loan Corporation (HOLC), to launch a national effort to help homeowners refinance their mortgages. The original HOLC, launched in 1933, bought mortgages from failed banks and modified the terms so families could make affordable payments while keeping their homes. The original HOLC returned a profit to the Treasury and saved one million homes. We can save roughly three times that many today. We should also put in place a temporary moratorium on foreclosures and freeze rate hikes in adjustable-rate mortgages. We've got to stem the tide of failing mortgages and give the markets time to recover.

Now, let's put her idea into some context. If the Treasury is able to move forward with the bailout, they will effectively socialize the financial derivatives of mortgages. Now, Hillary Clinton suggests that we socializes the mortgages themselves. Is there any doubt that Hillary Clinton is far closer to a socialist that a capitalist.

Now, let's examine the merits of the proposal. The average borrower in deep trouble has a mortgage that far exceeds what they can afford. In other words, it's not so much the rate that is the problem but the loan amount. Furthermore, most of these folks owe more than the home is worth. These folks are terrible credit risks. Hillary Clinton would like to move their mortgages from private industry and have the tax payers be their creditors. For all of my readers that are tax payers, how do you feel about loaning your tax dollars to folks that have proven they can't stay on time on their mortgage?

She goes from a partisan, ideological and populist to simply being just full of chutzpah with this next idea.

The time for ideological, partisan arguments against these actions is over. For years, the calls to provide borrowers an affordable opportunity to avoid foreclosure as a means of preventing wider turmoil were dismissed as government intrusion into the private marketplace. My proposals over the past two years were derided as too much, too soon. Now we are forced to reckon with too little, too late.

As a result, the home-mortgage crisis slowly eroded the value of debt instruments upon which Wall Street firms were depending. That is how this house of borrowed cards began to fall. If we do not take action to address the crisis facing borrowers, we'll never solve the crisis facing lenders. These problems go hand in hand. And if we are going to take on the mortgage debt of storied Wall Street giants, we ought to extend the same help to struggling, middle-class families.

So, if you don't support the socialization of mortgages, you yourself are a partisan. The chutzpah of this lady is staggering. Call me a partisan but most of these folks bought more home than they could afford getting loans they should have never been approved for. I don't believe it is the government's job or duty to save these people from themselves. In my opinion, there are plenty of things worse than a lot of people losing their homes. Among them would be having irresponsible folks getting loans that are superior to the loans that responsible folks would get.

Just think about how this would work. Let's say a distressed borrower has a loan amount of 250k. The reality is likely that even at zero percent they couldn't afford their payment. In order to keep them in their homes this new government agency would not only lower their rate but even their loan amount. That's something someone with perfect credit wouldn't receive. To top it off, if you don't support her idea you are the one that is partisan.

The chutzpah is just getting started for Senator Clinton though.

Second, American taxpayers should have a voice and a stake in the resolution of this market crisis. If the Treasury proposal is enacted in its current form, the American government would assume enough financial risk to become the majority shareholder in the companies rescued by taxpayer dollars.

The American people are bearing the risk and therefore deserve to reap the rewards of a shared equity model. And mortgage securities bought by taxpayers must be valued accurately at prices disclosed in real time, with checks and reporting requirements to prevent abuse.

Third, taxpayers are being asked to bear an unparalleled degree of financial risk. We cannot allow taxpayers to take on this burden so that Wall Street and the Bush administration can hit the "reset button." This historic intervention demands a historic shift in priorities: an end to the broken culture on Wall Street, and the broken economic policies in Washington.

In the world of Senator Clinton, because tax payers are forced to bailout banks they should also be forced the bailout irresponsible borrowers. Every problem that Hillary Clinton points out in the bailout of banks is even more magnified if borrowers are given a similar bailout through her plan. Talk about bearing a about the tax payers being on the hook for loaning out money to millions of borrowers that have proven to be bad credit risks.

Am I in a nether world? Hillary Clinton goes on and on pointing out all the potential problems with this financial industry bailout and she is totally oblivious that her own bailout would create the exact same problems. Yet, it is anyone that opposes her that is the partisan.

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