With the new housing bailout plan even those who misrepresented (i.e. lied) on their loan applications are eligible to receive government assistance. By committing what many would consider a fraudulent act they received a loan for a house they could not afford otherwise. Now when they cannot make their mortgage payments the Obama administration is going to help them perpetuate their fraud. These people are going to qualify for lower interest rates, lower payments, and possible a cram down to lower the outstanding balance on their mortgage.

            This attitude of rewarding bad or illegal behavior makes me wonder if a new trend is starting. If I lie on my drivers license form will I still get to keep my license? If I lie on my gun permit application can I keep my gun? How about if I lie about paying my taxes can I keep my government job?

            I would like to know the percentage of failed mortgages that are due to applicants misrepresenting their income. I would also like to know why it is the taxpayer’s responsibility to reward them for their bad behavior. These questions need to be asked and not just by me. Nancy Pelosi, Harry Reid, and Teleprompter 1 should be leading that charge for accountability and responsibility and not just try to buy future votes with taxpayer money.

 

So, you want to take money from people who have earned it and give to others, but do it in a way that makes everyone think that it’s a good idea? It’s easily done. Of course it will take a couple of years and cause a terrific amount of damage but your goal will be accomplished.

Let’s start with banks. They have all the money so we need to force them to loan it to people who don’t have any. We will get the government to change the normal banking rules and tell the banks if they want to expand they will have to authorize loans to people who ordinarily would not qualify. If you want to survive you need to expand so many banks will start giving out these Less Than Prime (LTP) loans.

Of course LTP loans can cause problems for the banks since they want to be repaid. So let’s have the government step in again and buy those LTP loans from the banks. We will create a government mortgage agency and, for this experiment, call it Daisy Mae. The role of Daisy will be to buy loans from banks so they have enough cash to create more LTP loans. Thus, the banks fulfill their legal obligations and make money through fees and interest. We’ll even staff Daisy with officers who are gung ho on the plan and whose bonuses depend on making the plan work.

Now even with government support, Daisy can run short of money too. They will need to unload these loans as well. Here is where it gets stupid, or smart depending on your goals. We will have Daisy package these LTP loans into securities and sell them back to the banks as investments. As long as the economy is good and housing prices are going up, these investments are making money. With an increase in their assets and a government partner, the banks find that they are able to make even more LTP loans. We have now created a self-perpetuating doomsday device.

As we know, economies go up and they go down. The housing market does as well. All we have to do now is wait until a downturn in the economy triggers our device. As the economy goes down people get behind in their mortgages and those who bought more than one home as investments cannot sell them, so they stop their payments as well. We now have a government induced crisis that supposedly can only be solved by the government.

But they tell us that all will be okay. They will borrow money and buy the bad loans from the banks. The program will cover all the banking system like a tarp to keep them in business and help the economy. Included in this program will be system to refinance your mortgage with a lower government determined interest rate. The government will save your home and will take control of your mortgage from those evil banks that wanted to foreclose on you.

We are now primed for the last stimulating step. Let’s have the government borrow even more money and spend it on socially irresponsible programs that will do little to create the jobs we need. This will prolong the floundering economy and increase the cries for help. What better way to help you out when you cannot pay your new government mortgage than for the government to just forgive the loan and deed your house to you free of charge. Now you will be free from the mortgage and can spend your money to revitalize the economy. What a wonderful, kind, caring, and compassionate action for your government to take. How can anyone not be impressed and call it the best action any government has taken.

You now have a home that you did not pay for at the cost of massive government borrowing. But don’t worry about that. The government will repay those loans by getting money from where they always get money, the taxpayer. They will just raised taxes on those who do pay taxes, not you of course, and use it to repay those foreign countries that hold the notes. You get a home and the government uses another Americans’ money to pay for it. How could that be bad?

 This entire mess with the economy started with the Community Reinvestment Act enacted by President Carter. Designed to reduce discriminatory lending practices, which I support, it had the unintended consequence of placing the government in the position of evaluating the banks low income lending practices whenever that bank wanted to expand.

If you wanted to open a branch in another state, merge with another bank, or simply acquire an asset, you had to demonstrate your CRA compliance. No, not the part where you are eliminating discriminatory practices, but the part where you show what percentage of loans are to lower income areas.

Even so, there was progress for a while. Discriminatory practices were reduced and banks started to move into areas they had previously stayed away from. Of course whenever the government gets a toe hold, it wants more. It seized on the CRA score and started using it to force banks to increase the amount of loans to lower income people.

In 1989 the Financial Institutions Reform Recovery and Enforcement Act required banks to publicize their CRA ratings. This gave community organizations the ability to pressure banks into giving loans they may have felt were shaky.

Then along came President Clinton. In 1992, 1994, 1995, and 1999 he signed into law various bills that further increased the need for a bank to have a good CRA score. He removed interstate banking regulations for banks that had a good CRA score (I thought Bush was into deregulation). So by loaning money to people who may not be able to pay it back you could grow into a multi-state bank instead of a local one.

He directed Fannie Mae and Freddy Mac to devote a percentage of their money to buy these CRA mortgages. Now a bank could give out a sub-prime loan to increase their CRA rating and then sell it to reduce their risk in case of a default. And sell they did.

His whole purpose was to use the government to force banks to loan money to lower income people thinking it would improve their lives with home ownership. Over the following years, this idea was encouraged by several Democrat leaders. Even though the warnings were out there, this policy was followed, leading us into the current financial crises.

Of course, loaning money to people who cannot pay it back doesn’t help them. If you want to put a person into a home they cannot afford, get them a better job. Don’t change sound banking policy and put everyone at risk. The role of government should not be to force a social agenda onto the public, but to provide opportunities for the people.

When times are tough, get me a job. When times are good, promote growth so I can find a better job. As long as the banking process is fair, I can get my own mortgage and I will not default. This mess we are in now can be weathered as long as the government finds a way to help businesses expand and provide us with the jobs we need. We’ll take care of the rest.

 In his televised infomercial, Senator Obama let loose with one of the magic words. He said that her wants to make sure everybody makes a “living wage”. Sounds good doesn’t it? If everyone makes a living wage then there is no more poverty and all will be able to afford health care insurance and send their kids to college. What could be better that that?

So, what is a living wage? How much do you need to provide a decent living for your family? If you are married and have 2 children, how much will you need to earn? Would you need $40,000, $50,000, or maybe $60,000 to live on?

Let’s say a family of 4 needs $50,000 a year to own a home, a car, a 401K plan and health insurance. That’s nearly $25 an hour. Does the phrase “make a living wage” mean that everyone will make at least $25 an hour? A family in the Midwest might be able to live on that, but I doubt you could live in New York or San Francisco on that.

What if your job is cooking french fries at the local McDonalds. A mandated living wage could mean you have to pay that person $25, or more, to cook those fries. Good work if you can get it. I had to get training in computers and electronics before I made it to that level.

I have to wonder though, what effect will tripling the wages for your fry cook do to the price you have to charge for those fries? Will you still be able to get a small fry for only a dollar? When you last were in a McDonalds at lunchtime, I am certain there were several people working there. If they were all making $25 an hour (more for the managers) what will the price be for your lunch? Will you be able to walk in there with $6 and still get a meal? I don’t think so.

For most businesses, wages are their highest expense. Tripling wages for the lowest level will force them to also raise wages for skilled workers. When your largest expense grows, so does the amount you have to charge for your product. It’s either that or lay people off. If you are having problems now with inflation, what will you do when everything doubles in price? What will the new living wage be when prices double?

Entry level jobs are meant to not only help businesses keep prices down, but to provide non-skilled workers an entrance into the work force. It gives them experience and shows them what additional schooling and training will do for them. If you can make a living wage without even graduating from high school, what motivation is there for you to improve yourself? My first job paid me $1.70 an hour and I was glad to get it. But I knew even then it was time to finish school and get moving. I am a better provider for my family because of it.

I realize that Senator Obama wants to get elected and saying “living wage” automatically triggers sympathy in many voters. But what will the true cost of such a policy be for America? What will happen with inflation? How will that policy affect the desire of our kids to attend college if they can make that “living wage” without even graduating from high school?

 

Many have made a lot about the choices that Senator Obama has made in the people he associates with. He has chosen people like Jeremiah Wright and William Ayers and has had those choices questioned. Senator Obama replies to those questions by saying that they were not the people he knew or, in the case if Ayers, he assumed that repentance had happened.

If we take the Senator at his word, we can say that he has made some bad choices. People do make bad choices. Your knowledge of a person may be incomplete when you choose to associate with someone and this may lead to a bad choice. I have made that mistake myself. Of course an association requires the choice of both people. To maintain an association or friendship, both partners must choose to do so.

We have heard Senator Obama’s reasons and assumptions but we have not heard from the other people in question. We have not heard why someone who preaches “God d@mn America” would chose to introduce Obama to influential people in the community. Nor have we heard why someone who talks about the “KKK of America” would choose to give the opening prayer at an Obama event. Even though he was later asked not to give that prayer in public, he still chose to do so.

One could also question the motivation behind the decision of Ayers to associate with Obama. Why did a person who was glad to be photographed standing on the American flag, host a fund raising party for the Senator? Do you raise money for people you know nothing about?

Why did someone who said he was not sorry about his past terrorism, but wished he could do more ask Barack Obama help him distribute money for his project? William Ayers and 2 others were authors of a proposal for grant money from the Annenberg Foundation. He was then instrumental in creating the organization to distribute the money. One of the people chosen to run the organization was Barack Obama. Ayers went on to attend many of the meetings even though he was not on the board. It would be difficult to say that he had no say in the choice of board members.

Let us not forget Tony Rezko. More than once he tried to get Obama to work for him. Did he have a flash of insight that if only Obama would work for him he might refrain from wire fraud and solicitation?

As I have said before, people can make mistakes in their associations. Senator Obama has attempted to explain how he came to make those mistakes. Now, can we hear from the other side? Why did those people all decide to associate with Barack Obama? What did they see in him that would encourage them to include the Senator in their lives?