I have watched with growing alarm the “rumor” that the Obama Administration is about to use Fannie and Freddie (who have already received $480 billion “bailout” dollars, and are asking for more as we speak…) as an agent to “forgive” the upside down part of some 15 million upside down mortgages. In effect your tax dollars would be subsidizing the already-burst housing bubble that Fannie and Freddie created the first time around, creating an even bigger bubble. (I think in Elementary School we used to have something called “Super Bubble”… but this would be the “Mother of all Bubbles”)
The Obama White House has issued a denial, of course. And naturally we can trust that this President would never go against a promise he’s previously made to the people, strictly for political reasons; that would be so… unlike him. Why would any reasonable person–one who has closely followed the events of the last two years; and no ‘closely followed’, does not mean getting your news from the MSM and then considering yourself to be “informed”–possibly be so jaded or cynical to actually believe that someone who cares so much about the people’s opinion, like Obama does, would have the nerve to wager the entire future of our country for a few votes in an off-year election? What have we seen that could possibly lead us to believe that this great man, this shining example of dictatorial excellence, would be so arrogant as to opt for even more spending that the public doesn’t want–in a daring move that is as likely to bring about the collapse of our society as it is to bring about some miraculous comeback in elections that appear to be a foregone conclusion? That could never happen… right??
Reuters columnist James Pethokoukis tells us the markets are preparing for a fantastically expensive “August Surprise” from President Obama:
Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion… The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses.
This vote-buying scheme would come on top of $400 billion in taxpayer dollars already pumped into Fannie and Freddie… just a few years after Democrats assured us there was “no crisis at Freddie Mac, and particularly Fannie Mae” (Maxine Waters) and the corporations had no “safety and soundness problems” (Barney Frank.)
Fannie and Freddie are among many black holes gobbling up tax money these days. In the two years since Barack Obama took the bailout football from George W. Bush and ran it several trillion yards, the American economy has degenerated into a massive life support system for its most insolvent components. Financial institutions, auto companies, and “stimulus” targets have been infused with hundreds of billions taken from taxpayers. Each new, politically connected corporation declared “too big to fail” becomes a crushing burden on a nation too weary to hold them all up.
This “August Surprise,” presented to underwater mortgage holders by our children on behalf of the Democrat Party, detonates the current line of garbage from panicked liberals… who have been floating a new meme that rampant deficits are caused by insufficient tax revenue. Spending will always be the problem, because spending is easy.
The stakes could not be higher, as the good Doctor explains further down:
Bailouts also leave unsustainable business models running, like badly-tuned cars with bricks on the accelerator pedals. General Motors didn’t fail because it wasn’t making decent cars, or enjoying adequate sales. It failed because it had a ridiculous business model, with union labor costs completely divorced from reality. This model would have dissolved during normal bankruptcy proceedings. Instead, taxpayers were looted for billions to keep it afloat. None of the factors that killed it the first time have changed much.
These are the factors leading to the bailout singularity, in which the productive economy collapses beneath the pressure of feeding its ulcers and tumors. Every subsidy is a tax on those who don’t receive it. Risk, investment, and thrift dissipate when they become less rewarding than political connections to the leadership of a command economy. Expensive plans designed to deny the consequences of mistakes and crimes lead to the blindness of a system that learns nothing from its errors. A contracting economy will never generate enough blood to sustain an enormous State that knows no limits to its hunger, and refuses to give back anything it takes.
The blood feeding that State is not just money. It’s liberty. The individual citizen is given no way to refuse the demands of a government that can’t wait to subsidize favored constituencies. The right to save, invest, or spend the benefits of our working hours diminishes steadily. The next titanic bailouts will be for bankrupt states and union pension plans. I think they will break the system, because either the populace will resist them with absolute force, or the collapse into a lifeless singularity will be complete… and America is not ready to become lifeless yet.
These are high stakes indeed; and if you are like me you are probably royally ticked off if you are learning about this “August Surprise” proposal for the first time. Here is a suggestion: channel that energy and angst into defeating these charlatans and throwing their Marxist asses out onto the streets come November. This is no time to be on the sidelines. I do not wish for future generations to be studying the Decline and Fall of the United States and to be asking the question: “Why in the world didn’t the people rise up and DO something about this runaway, out of control government? Why did they just sit around and pretend it wasn’t really that bad when they could have taken action?”
If that question is ever posed, it will you and me they would be questioning, and it would be hard to blame them–especially given the alternative future they are likely to inherit. I for one do not intend to go quietly into that “good night”.
Read the whole thing. Doctor Zero is always an excellent read. And don’t say that you weren’t warned.
UPDATE: Ed Morrissey reports that Rasmussen is already polling about the August Surprise bailout and the “Nays” are 20 points ahead of the “Ayes”. The spread gets even bigger with actual homeowners.