Archive for the ‘Depression’ Category

A Look at the Causes of the Credit Crisis

March 17, 2009

Recently, there’s been a lot of talk about the American credit system.  Personally, I think Americans rely far too heavily on credit, and that is going to come back to haunt us VERY soon if we don’t make some drastic changes.

Back during the debate over the first bailout bill of this year, Senate Minority Leader Mitch McConnell (R-KY) made the following comments:

more about “A Look at the American Credit System …“, posted with vodpod

And it’s that type of thinking that leads to the credit crisis that we’re in now.  The credit system is like our circulatory system?  NO!  We should not be relying that heavily on our credit system.  Credit is NOT intended to be the same thing as money.  Equating credit with available spending money is one of the major factors that led to the Great Depression.  People were buying things on credit and laying out installment payment plans.  That enabled them to buy more stuff, and this created an artificially high demand for items (such as radios or cars, both of which were often being bought on credit).  But once they began having to pay multiple payments back, people could no longer to afford to continue buying stuff (thus why I called the demand “artificially high”) – the demand for those items was not necessarily high, people were just buying things immediately that they normally would have saved up for.  And when they didn’t keep track of how much that would cost in the long run, the credit bubble burst.

The other day, I posted a comment on a friend’s blog (Right Wing Reform), and that’s what got me thinking about all of this.  The following is my comment (with a little more added in – I wrote the original comment to be quick and short):

The credit system is intended to be used as a crutch.  You still do the walking, but you can’t quite walk all by yourself at the beginning of an injury (purchasing a large item).  Over time, you begin to pay off the debt (heal), and use less and less of the crutch, until eventually you don’t need it (the item is paid off).  The problem with the current way many Americans are using credit is that they’re using it more like a wheelchair than a crutch.  And it’s used too often, even to take one little step in a room (buying a meal at McDonald’s or a small purchase at the grocery store).  The problem with using it for small items is that over time, you begin to lose track of how much you’re spending (unless you have a GREAT memory), and a lot of people find themselves not being able to pay off the entire credit card bill at the end of the month.  And do you know what that means?  That’s right, they have to pay interest on that.  And that means less money in their pocket, meaning that they are MORE likely to use credit as cash.  And the person (or family) gets deeper and deeper into debt.

When you overburden the credit system and you never try to walk on your own, the crutch breaks.

Honestly, we’re never going to be able to get rid of credit.  And there’s no reason to.  When used responsibly, it’s a great tool.  But a strong financial system would be able to withstand a loss of a credit system (at least small item credit [the biggest example of a small item credit system would be credit cards; another example would be  installment payments for stuff like furniture] - I would argue that it should be able to withstand the loss of large item credit, but this would mean that buying a house would be something that takes a lot of work and time, and you’d go back to the days of people building their own houses and living with other people rather than a single person owning a home by the age of 23).

Right now, America would not withstand the loss of even the small item credit system, and THAT is a problem for us financially.

If Americans want to get through this financial crisis, keeping the credit cards at home more often would be one way to help.

Done Ranting,

Ranting Republican

Live Analysis of the Final Presidential Debate

October 15, 2008

Alright, we’re moments away from the beginning of the debate.  As always, I’ll be watching CNN, who will have a focus group (undecided voters in Ohio) with a tracking rating of how people like what they’re hearing (broken up by men and women).  WordPress just added an option to add polls, so I’ll see if I can get that working after the debate is over and post a poll about who won.

Tonight’s debate will be moderated by Bob Schieffer (CBS’s Face the Nation).

We’re about 2 minutes away.

Schieffer: Why is your plan better than your opponents?

McCain: Thanks to everybody, my prayers go out to Nancy Reagan.  “Americans are hurting and angry.”  They’re innocent victims of greed.  “They have every reason to be angry.”  We have to have a short term fix and long term fixes.  Short term fix: Fannie and Freddie cause the sub-prime lending situation, that caused the housing market to collapse.  We need to reverse the decline in home ownership.  People need to know that they can stay in there homes.  Let’s take $300 billion of the $750 billion and buy mortgages so that people can stay in their homes.  What about people who could already afford to stay in their homes?  It’ll drive home value down if there are abandoned houses.  I didn’t like the answer (because I’m staunchly against any of the bailout), but it’ll go over well with voters, and the focus group liked it.

Obama: I think this’ll take some time to work itself out.  We need an economic package for the middle class.  The fundamentals of the economy were weak before this crisis (it depends what you’re defining fundamentals of the economy as).  Tax cut for people making less than $200,000.  Buying mortgages could be a bailout to banks, so I disagree with McCain there, but we do need to help homeowners.  Need to fix energy and health care.

McCain: Obama had an encounter with a plumber, Joe (somebody) Wurzelbacher.  Joe wants to buy the business that he’s worked in, and  he looked at Obama’s plan, and he saw that he’d be put in a higher tax bracket, and that’d cause him to not be able to employ people.  Joe, I’ll not only help you buy that business and keep your taxes low, and provide a way for you to provide health care to your employees.  You want to increase people’s taxes, like Joe the plumber’s.  And he’s right there – he’ll kill small businesses if he raises taxes.  The  focus group liked that.

Obama: McCain wants to give tax breaks to some of the wealthiest companies, including oil companies.  I want to give tax cuts to 95% of Americans.  Income tax, capital gains tax.  THAT’S A LIE ABOUT CAPITAL GAINS!!!  He wants to take capital gains taxes back to levels before Clinton lowered them!  I want to give small businesses tax breaks.  He lies here – 11.5% of Americans don’t even PAY income taxes, because they don’t make enough money!

McCain: Obama says, “We need to spread the wealth around.”  “I want Joe the plumber to spread the wealth around.”  Why would you want to raise taxes?

Obama: I want to cut taxes for 95% of Americans.  Not true!  I want to cut taxes for Joe the plumber before he was able to make $250,000.  I want to give families with kids going to college a break.  I’d prefer that nobody pay taxes, but we have to pay for the core of the economy to remain strong.

McCain: Companies will go overseas if we raise our business tax rates.  “Of all times in America, we need to cut taxes and encourage business, not spread the wealth around.”  Great answer – McCain actually did better with the focus group there than McCain, and that surprised me.

Schieffer: Talking about reducing the budget deficit.  Won’t some of the programs you’re proposing have to be trimmed or eliminated?

Obama: If the $750 billion works as it’s supposed to, taxpayers will get their money back.  I have been a strong proponent of pay-as-you-go.  Some of the cuts we’ll need are subsidies to insurance companies.  “It’s just a giveaway.”  I’ll go through the federal budget line-by-line, and eliminate what’s unnecessary.  We need to invest in the American people.  We need to prevent diseases when they’re young, so they won’t spend as much Medicare money.  The same with college – they’ll drive up the economy.  He’s getting very high ratings right now – he’s appealing to the average American people.

McCain: Back to home-ownership.  During the depression, we bought homes and home values went back up.  This was a plan that Senator Clinton proposed.  We need to become energy independent.  I need an across-the-board spending freeze.  I oppose subsidies for ethanol.  Sorry – got interrupted there.  I will veto earmarks.  Senator Obama put in an earmark for a projector in a planetarium in his hometown.

Obama: An across-the-board spending freeze is a hatchet, and we need a scalpel.  Senator McCain talks about earmarks, but they account for 0.5% of the federal budget.  Eliminating them will help, but it won’t solve the problem.  When President Bush came into office, we had a budget surplus, and now we have a deficit.  Pursuing Bush-esque budgets will worsen the situation, and McCain voted for Bush’s budgets, 4 out of 5 times.

McCain: I will give a new direction to this economy.  I’m not President Bush.  If he wanted to oppose him, he should’ve run 4 years ago.  Mayor Bloomberg just put in a spending freeze in New York, so it can be done.  I’ll eliminate spending.  Obama voted for the last 2 budgets that Bush proposed (the only 2 that came up since he’s been in office!).  I have fought against spending and special interest.  When have you stood up to your party?  He’s getting good ratings, and I really think that he’s appealing to American people.

Obama: The first major bill I voted on was against tort reform.  I support charter schools.  I support clean coal technology.  I have a history of reaching across the aisle.  If I mistaken your policies for President Bush’s policies, it’s because on the core economic issues, taxes, spending, etc…, you’ve been a supporter of President Bush.  You’re been against him on stuff like torture, and I commend that, but for the majority, you want 8 more years of the same thing.

McCain: It’s been clear that I’ve disagreed with Bush and my party: climate change, opposition to earmarks, torture, conduct of the War in Iraq, Medicare prescription drugs, HMO patients’ bill of rights.  I have stood up to my party’s leadership.

Schieffer: Both of you promised to take the high road, but both campaigns have turned nasty.

McCain: This has been a very tough campaign.  If Obama had responded to my request to do town hall meetings, like he originally said, the tone of this campaign could’ve been better.  The tone of this campaign has taken a nasty turn.  I apologize for some of the negativity that has come out of my campaign.  I hope OBama will repudiate the remarks made by Congressman John Lewis.  Obama didn’t keep his word about taking public financing.  He’s getting high ratings from men here, but average ratings from women.

Obama: 2/3 of the American people think McCain’s running a negative campaign, versus 1/3 of the American people thinking that of mine.  100% of your ads have been negative (BULL CRAP!).  There’s nothing wrong with having a vigorous debate like we’re having now, but not having town hall meetings doesn’t justify the ads that have come out from your campaign and 527s.  I don’t mind being attacked for 3 weeks, but we can’t afford 4 more years of failed economic policies.  He’s actually getting negative ratings from women, and average from men here.  He’s really attacking McCain during a question about negativity in campaigns, and I think he’s really making himself look bad here.

McCain: If you turn on the television, every other ad was an attack ad on my health care policy, saying that I oppose federal funding for stem cells.  I don’t.  Obama is spending unprecedented amounts of money in negative attack ads on me.  Of course we’re talking about Joe the plumber and restoring jobs to America.  That’s what my campaign is all about.  Again, I didn’t hear a repudiation of Congressman Lewis.

Obama: Lewis, made a statement with what he was troubled with hearing some of the rallies that your running mate was holding.  People were yelling “terrorist” and “kill him,” and your running mate didn’t stop them.  I do think that he gave a good comparison between what’s happening now and the civil right’s movement.  What the Americans want is for us to focus on the challenges that we have now.  We have serious differences on health care.  When people bring up me being with terrorists, that’s not the issues.

McCain: Whenever you have big rallies, you’ll have fringe people, and that’s not appropriate.  But for the majority of people, they’re not saying anything negative.  These people are the most patriotic people in this nation (veterans and wives of veterans).  There’ve been thingsat your rallies that I’m not happy with either.  I have always repudiated out of line statements, and I will continue to do that, but we cannot stand for the things that have been going on.  I haven’t.

Schieffer: Do you take issue with that?

Obama: What I think is most important is that we recognize that in order to solve 2 wars, a financial crisis, creating jobs, then we all need to be able to work together.  “We need to disagree without being disagreeable.  What we can’t do is try to characterize each other as bad people.”

McCain: We need to know the full extent of Obama’s relationships with Ayers and ACORN.  If there’s nothing there, I don’t care about it, but we need to know what all went on there.

Obama: Mr. Ayers has become the centerpiece of McCain’s campaign.  Bill Ayers is a professor in Chicago.  40 years ago, he engaged in despicable acts.  “I have … condemned those acts.”  I served on a school board with him 10 years ago.  “Mr. Ayers is not involved in my campaign … and he will not advise me in the White House.”  ACORN: Apparently, they were paying people to get people registered to vote.  The only thing I did with them was represent them with some thing in Illinois – I didn’t catch it all.  I associate with Warren Buffet on economics.  On foreign policy, it’s Joe Biden or Dick Lugar, or General Jim Jones.  “Those are the people who have shaped my ideas and will be surrounding me in the White House.”

McCain: While you and Ayers were on that board, you gave money to ACORN, and you launched your campaign from Ayers living room.  In 2001, he said he’d wished he’d have bombed more.  We need to know all the details here.  And my (not McCain) view is that with Ayers – it’s no big deal if Obama’s honest.  With ACORN, there are some serious problems there – ACORN has supported Obama, and Obama has supported ACORN, and ACORN has shown to have some serious legal problems.

Schieffer: Why is your running mate better than his?

Obama: He’s been there a while – he knows what he’s doing, especially when it comes to foreign policy.  Biden has never forgotten where he came from.  He fights for the little guy.  He has always been fighting for working families.  “After 8 years of failed policies [we] will have to reprioritize … give tax cuts to small businesses … and individuals who are struggling.”  We need to become energy independent, and make sure that our kids afford can go to college.  Biden has always been on the right side of the issues.

McCain: Palin is a reformer.  She took on the old governor, who was part of her party.  She’s given money back to taxpayers and cut the size of the government.  “She is a reformer through and through, and it’s time that we have that breath of fresh air and sweep out” the old politics of Washington.  “She understand special needs families, and understands that autism is on the rise.”  She has united people all over America, and I’m proud of her.

Schieffer: Is she qualified to be President?

Obama: That’ll be up to the American people to decide.  Her work on special needs kids has been commendable.  He didn’t answer the question!  If we have an across-the-board spending freeze, special needs kids will suffer.

McCain (on Biden): Biden is experienced, but he’s had some bad foreign policy ideas, such as dividing Iraq into different countries, and we’ve seen Iraq become united as one country.  Every time Obama says we need to spend more.  Why can’t we have transparency of these government organizations.

Schieffer: Energy and climate control.  Presidents have said that we need to reduce our dependency on foreign oil.  Give us a number of how much you believe we can reduce foreign oil during your first term.

McCain: We can eliminate our dependence on Middle East countries and Venezuela.  Canadian oil is fine.  We need nuclear power plants, and that’ll be how we eliminate those 2 sources of foreign oil.  We need wind, tide, solar, gas, clean coal.  He’s getting huge ratings, and for good reason – it’s a good energy plan.  Especially the nuclear part!!!!

Obama: In 10 years, we can reduce our dependence so we don’t have to import oil from the Middle East or Venezuela.  “Nothing is more important than us borrowing … money from China and sending it to Venezuela.”  We need to expand domestic production, by telling oil companies, “Use them or lose them” in terms of oil fields being leased here in the U.S.  We need to drill offshore, but that won’t solve the problem.  We need wind, solar, biofuel.  We need efficient cars built here in America, not in Japan.  And he’s got good ideas too, but I WISH he would’ve said he wants nuclear power - nuclear power is safe (we use it on subs) and VERY efficient.  NAFTA didn’t have enforceable environmental agreements, and we should’ve included those.  When it comes to South Korea, we have an agreement with them, and they’re sending more cars here than we are to them.  That’s not free trade.

McCain: “Obama said, ‘We will look at offshore drilling.’  Did you catch that?  ‘Look at.’”  We need to do more than look at it, we need to do it.  AGREED!  Our businesses are paying money into Columbia, but because of previous agreements, they’re getting their goods into here for free.  We need a free trade agreement with Columbia, which Obama has opposed.  Obama hasn’t even travelled down there, and he doesn’t understand Columbia.

Obama: I understand it.  Labor leaders have been persecuted, and we need to stand for human rights.  Workers who are trying to organize for rights shouldn’t be persecuted, and that’s why I supported a free trade agreement with Peru.  When I talked about automakers, they’re getting hammered right now, not only because of gas prices, but with the financial crisis.  People can’t get car loans, so we need to get loan guarantees.  We need more efficient cars and cars of the future.  That’ll help create new jobs.  He’s getting VERY high ratings – he’s maxed out with women, and men are rating him high too.

McCain: Obama doesn’t want a free trade agreement with our best ally in the region, but wants to sit down with Hugo Chavez without preconditions.  Jobs and businesses will be created if we open up those markets.  Obama wants to restrict trade and raise taxes, and the last President who did that was Hoover.  We went from a deep recession to a depression.  I won’t let that happen.

Schieffer: Would you first lower health care costs, instead of providing more health care?

Obama: We need to do both.  My plan will allow you to keep your plan if you have health insurance.  We will lower costs so that cost savings are brought back to you.  If you don’t have insurance, you can buy into the same kind of federal pool that federal employees enjoy.  Insurance companies won’t be able to discriminate against people with preconditions.  Drugs will be lower, and we need to look at preventative care.  This will require more money up front, but will lower costs in the long run.  VERY high ratings at the end there.

McCain: Premiums and copays are going up, and health care costs are going up and inflicting pain on Americans.  We need walk in clinics and community health care centers.  We need nutrition and physical fitness programs in schools to keep kids healthy.  I want to give all American families a $5,000 tax credit.  Under Obama’s plan, if you have employees and they have kids, if you don’t have a health care plan, Obama will fine you.  I still haven’t heard what that fine will be.

Obama: Your fine will be $0.  I exempt small businesses for the requirement that large businesses have to provide health care.  Well, Senator Obama, what do you consider a small business???  The average family is paying higher premiums because of the uninsured.  I’ll give small businesses a 50% credit so they can afford it.  If not, you can buy into the plan I have.  McCain will give you the tax credit, but what will happen to older folks who can’t afford the health care plan?  McCain will tax the health care benefits you have from your employer, the first time in history this has ever happened.  Insurers right now are restricted statewide.  Those rules would be stripped away, and you’d see companies excluding people.

McCain: People like Joe are rich, because Obama said about him that we need to “spread the wealth,” so he’s rich enough that he would be fined.  Under my plan, people will be able to go across the country, giving them the chance to choose their futures.  “Senator Government–Senator Obama wants government to do the job.”  Senator Obama and the Democrats have been in charge the last 2 years, and things have gotten worse.

Obama: Under McCain’s plan, there’s a strong risk that you will lose your health care from your employer.  All I want to do is lower costs.

Schieffer: Could either of you nominate a Supreme Court Justice who disagrees with your view on Roe v. Wade.

McCain: I have never had a litmus test.  I think the Court decided incorrectly there, but I’m a Federalist – it should be left up to the states.  We need to nominate people based on qualifications, not if I agree with their ideology.  There should be no litmus test.  These nominees should be picked based on qualifications, who adhere to the Constitution, not people who legislate from the bench.  (But people who stick to the Constitution would oppose Roe v. Wade).  I’ll have no litmus test.

Obama: I’d agree that we shouldn’t have a litmus test.  Fairness and justice should be given to the American people.  It’s very likely that one of us will be making 1 or more appointments, and Roe v. Wade hangs in the balance.  I support the decision in Roe v. Wade.  I believe that women are in the best position to make this decision.  The Constitution has privacy built into it that shouldn’t be subject to state referendum or popular vote.  “I will look for those judges who have an outstanding record … intellect.”  McCain and I disagreed when the S.C. made it harder for some woman to bring suit for equal pay for women.  The Court said that she waited too long.  If a woman is being treated unfairly, the Court needs to stand up if nobody will.

McCain: You can’t waive the statute of limitation 20 to 30 years.  Senator Obama, as a member of the Illinois State Senate voted in the Judiciary Committee against a law that would provide medical attention to babies who were not successfully aborted (essentially passive infanticide).  Then he voted present on the floor.  He did the same with partial birth abortion.  Men are liking this, but women not so much.

Obama: That’s not true.  There was a bill put forward that said that you need life saving treatment that would undermine Roe v. Wade, but there was a law alreay on the books.  On partial birth abortion: I’m supportive of a ban on late term abortions as long as there’s an exception for the safety of the woman’s life.    Both men and women are rating him a bit above average now.  Surely there is some common ground, when both sides can come together and prevent unintended pregnancies.  Communicate that sex shouldn’t be engaged in carelessly.  Adoption choices should be out there.  Those things are now in the Democratic platform, for the first time ever.

McCain: “Health of the mother” has been stretched to mean almost anything (such as mental health in some cases).  Cindy and I are adoptive parents.  We need to promote adoption and protect the rights of the unborn.

Schieffer: A question about education and national security - I missed what all it was.

Obama: No nation has had a bad economy and a good military.  Education is a huge part of this.  We need better pay for teachers.  We need college to be more affordable.  We’ll offer an exchange of community/military service with money for college.  We can’t do this just in schools.  Parents need to show responsibility too – encourage thirst for knowledge.  And he’s absolutely right here.  It starts at home.  People rated him as high as they could.

McCain: Choice and competition among schools are some of the key elements – New York and New Orleans – where we find bad teachers another line of work.  We need to give parents a choice in sending kids to good schools.  Charter schools are one option.

Schieffer: Should the federal government play a larger role?

Obama: The states need to be in control, but the federal government needs to step in and help struggling local school districts.  Bush did this with No Child Left Behind, “but unfortunately, he left the money behind.”  That was a good line.  McCain and I agree on charter schools.  I think we need to encourage competition between schools.  Bad teachers need to be replaced.  “Our kids need to have the best future.”  We disagree on vouchers, and we disagree on college accessibility.  McCain doesn’t have programs that help college groups.  (That’s because he’ll simplify the tax code to make finding tax credits for college easier to find).

McCain: Vouchers need to be provided, because parents WANT vouchers.  They wanted to chose the schools where their children go (this was in Washington, D.C.).  As far as NCLB, it had its flaws and problems, but it’s the first time we looked at this from the national perspective.  Head Start is a great program.  It’s not doing what it should do, so we need to reform it and fund it.  We can’t just give more money, we need to reform it too.  We need transparency, rewards, and funding.  We’ll find and spend money to find the cause of autism, but to have a situation that the most expensive education is in America means that we also need reform.  We can’t throw money at a problem without reform.  Vouchers work.

Obama: On vouchers in D.C.  The D.C. school system is in terrible shape.  The superintendent there is doing a great job (McCain interjected that she supports vouchers).  There’s not proof that vouchers solve the problem.  We need a President who will tackle this head on.

McCain: Obama said that because there’s not enough vouchers, we shouldn’t have any.  That’s wrong.

Schieffer: Closing statements.

McCain: Thank you.  We need a new direction.  “We cannot be satisfied with what we’ve been doing for the last 8 years.”  I’ve been a reformer.  I’ve opposed my party.  I’ve been a good steward of your tax dollars.  We need to make health care and education affordable to all.  We need to stop this wild spending.  All of these promises made tonight will be made based on whether you trust us or not.  I ask you to examine both my record as well as my proposals for this country.  I’ve put my country first.  “It’s been a great honor of my life, and I’ve been proud to serve, and I hope you’ll give me the opportunity to serve again.  I’ll be honored, and humbled.”

Obama: Washington has been unwilling to address the problems.  We cannot adopt the policies of the last 8 years.  We need change.  You’ve invited me into your homes.  “Our brighter days are still ahead, but we have to invest in the American people.”  College needs to be more affordable.  Wages need to be higher, and we need to grow the middle class.  “It’s not gonna be easy.  It’s not gonna be quick.”  Republicans and Democrats will have to come together.  “If you give me the … honor of being President, I will work tireously and  honorably to ensure the future of our children.”

Bob Schieffer: As my mother would say: “Go vote now.  It’ll make you feel big and strong.”

McCain/Obama: Thank you (to each other).

Alright, overall, I think this was BY FAR the best debate we had.  I commend Bob Schieffer.  He was by far the best moderator we had.

Overall, I think McCain won this won.  This is the first time I’ve called a debate (other than the VP debate, where I called Biden the winner), and I think McCain won.  He was VERY strong toward the beginning.  I think Obama was weak at the beginning, but picked it up toward the end, but overall, I think that McCain was the winner.

Again, I think McCain was definitely stronger here.  I think Obama was too weak.  This was definitely the debate McCain needed, but I’m not sure that it’ll be enough for him to recover.

Done Analyzing,

Ranting Republican
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Why the Economic Stimulus Package Was a Terrible Idea

March 21, 2008

Alright, so I was looking around Senator Chuck Hagel’s (R-NE) website to see about his new book, and I stumbled across this press release:

Hagel Statement on Vote Against Senate Economic Stimulus Package
 
February 7th, 2008 – U.S. Senator Chuck Hagel issued the following statement today after voting against the passed United States Senate economic stimulus package:“In the last few years we have overbuilt, overmortgaged, overleveraged and abused credit. The market is now self-correcting.

“This economic stimulus package is wrongheaded, short-sighted and will only drive our country deeper into debt and continue to perpetuate this irresponsible mantra of spend, spend, spend. We are borrowing money that our children are going to have to pay back. Flying over America dropping rebate checks that we can’t cover doesn’t solve anything. This isn’t free money.”  

###

I’ve gotta say – I will always love that man and his politics – I disagree with him on a couple of things things, but he is by far my favorite politician (other than Reagan) – it still saddens me that he’s retiring, but I hope he gets back into it.  I told him on my last visit to D.C. (I should post a picture of that) that if he ever runs for anything, he has my full support.

OK, back to economics:

Here’s the bill that he was referring to: House Resolution 5140: H.R. 5140 Economic Stimulus Act of 2008 – here’s the summary, at least where I have a problem – the tax rebate stuff is fine, but Title II is dangerous:

Title II: Housing GSE and FHA Loan Limits – (Sec. 201) Raises the statutory ceiling on the maximum original principal obligation of a mortgage originated between July 1, 2007, and December 31, 2008, that may be purchased by either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Disregards mortgages purchased with the increased ceiling amount for purposes of meeting certain housing goals established under the Housing and Community Development Act of 1992.

Expresses the sense of Congress that Fannie Mae and Freddie Mac should securitize mortgages acquired pursuant to the increased conforming loan limits of this Act if the manner of securitization does not: (1) impose additional costs for mortgages originated, purchased, or securitized under existing limits; or (2) interfere with the goal of adding liquidity to the market.

(Sec. 202) Establishes a temporary loan limit increase for FHA-insured mortgages in specified high-cost areas for which a borrower received credit approval by December 31, 2008.

Grants the Secretary of Housing and Urban Development (HUD) discretionary authority to increase loan limits in 2008 based upon the size and location of residences in particular areas.

Directs the Secretary to publish the median house prices and mortgage principal obligation limits as revised by this Act not later than 30 days after its enactment.

And here’s why it’s dangerous: As Senator Hagel said, “we have … overmortgaged … and abused credit.  And what does this act do?  Raises limits on mortgages dealing with approved credit.  But here’s the problem (as I addressed in this post: http://inkslwc.wordpress.com/2008/03/19/monopoly-electronic-banking-credit-cards-terrible-for-kids/):

  1. People bought overpriced houses.
  2. They couldn’t afford these houses.
  3. Mortgages were given to people who NEVER should’ve been given mortgages, especially for as much as was loaned.
  4. People got adjustable rate mortgages (ARMs), which are normally used for people with bad credit, because it puts more of the risk on the person taking out the mortgage.
    1. The problem was that SO many people took out ARMs and then couldn’t pay.
    2. The banks don’t want to foreclose, because they can’t resell the property because the market is now in a state where most of the houses are overpriced, and too many people are already in financial trouble from previous mortgages.
  5. Another problem is credit – we have people all over using credit cards for whatever they want.  Rule #1 of a credit card: NEVER buy something that you couldn’t pay with cash.  Credit cards are meant for convenience so that you don’t have to carry around a wad of cash or keep all your money in a checking account where you aren’t earning interest, NOT as a secondary source for spending money.  Rule #2: Pay off the balance monthly so you don’t get nailed with interest.
  6. Yet another problem: All this $0 downpayment stuff – sure, it looks good, but that just means that you’re going to have to pay that $500 later PLUS interest!

Americans really need to go and take a simple budget or economics class, because these quick fixes are only going to hurt us.

Why is it the government’s job to fix problems that we created?  If I go out and buy a house I can’t afford and then can’t make payments, why is it the government’s job to right my stupidity?  It’s not, but ever since FDR did it in the depression, we’ve become dependent.  Herbert Hoover was right in not helping the people who just kept investing all their money in the stock market – their stupidity cost them.  Now, I understand that banks shouldn’t have been investing money that they didn’t actually have, but I’m not talking about that – I’m talking about the individuals.

If Americans aren’t careful, the economy will be slaughtered and the government won’t be able to bail people out time after time.  LEARN from your mistakes and don’t make them again, PLEASE for the sake of all of us!

Done Ranting,

Ranting Republican
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