Why there can be no recovery as long as Obama is President [Reader Post]

Barack Obama has unveiled a crisp, fresh and new campaign theme.

“It’s not my fault.”

President Obama has devised a new strategy for dealing with troubling economic developments: Showcase optimism about turning around the economy while reassuring voters that although he understands their fears he isn’t directly responsible for their pain.

It’s been 2 1/2 years since Obama became President and he has amply demonstrated what happens when a socialist tinkers with a free market economy. Until he’s gone, we’re dead economically.

There are several Obaminary obstructions to recovery: housing, health care, pointless spending, finance, business strangulation, the green fantasy and energy.

Housing

In their socialist zeal to make America pay for homes for everyone, Democrats opened the doors to the abuse of the mortgage system. Bill Clinton had Robert Rubin rewrite CRA in 1995

Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP-led Congress was almost sure to reject, Clinton ordered Robert Rubin’s Treasury Department to rewrite the rules in 1995.

The rewrite, as City Journal noted back in 2000, “made getting a satisfactory CRA rating harder.” Banks were given strict new numerical quotas and measures for the level of “diversity” in their loan portfolios. Getting a good CRA rating was key for a bank that wanted to expand or merge with another.

Loans started being made on the basis of race, and often little else.

Then Clinton and then-Housing Secretary Andrew Cuomo came down on banks, forcing them to make bad loans.

Clinton got the Department of Housing and Urban Development to double-team the issue. That would later prove disastrous.

Clinton’s HUD secretary, Andrew Cuomo, “made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis,” the liberal Village Voice noted. Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big way.

Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks.

Since they could borrow at lower rates than banks due to implicit government guarantees for their debt, the government-sponsored enterprises boomed.

With incentives in place, banks poured billions of dollars of loans into poor communities, often “no doc” and “no income” loans that required no money down and no verification of income.

By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market — a staggering exposure.

If that was not enough, Rubin then changed banking rules again and it was described this way:

Former Treasury Secretary Robert Rubin gets cozy with the banking industry while helping push through a bill freeing financial institutions to merge into ever larger megacorporations while largely absolving them of much of their legal obligation to invest in the communities in which they do business.

The predictions (from 1999!) were (and one in particular stands out):

And the weakening of the CRA is only one element of the finance industry’s deregulatory wish list which is included in the compromise legislation. The bill will:

■pave the way for a new round of record-shattering financial industry mergers, dangerously concentrating political and economic power;

■create too-big-to-fail institutions that are someday likely to drain the public treasury as taxpayers bail out imperiled financial giants to protect the stability of the nation’s banking system;

■leave financial regulatory authority spread among a half dozen federal and 50 state agencies, all uncoordinated, that will be overmatched by the soon-to-be financial goliaths;

■facilitate the rip-off of mutual fund insurance policy holders by permitting mutual insurance funds to switch domicile states — thereby enabling them to locate in states where they can convert to for-profit, stockholder companies without properly reimbursing policyholders (a conversion of tens of billions of dollars);

■permit the new financial giants to share finance, health, consumer, and other personal information among affiliates, compromising consumer privacy; and

■allow banks to continue to deny services to the poor (Congress rejected an amendment requiring banks to provide “lifeline accounts” to the poor, so they would have refuge from check-cashing operations and the underground economy).

Has Barack Obama changed any of this?

Why, no. So what has he done? He has thrown a life preserver to a man dying of thirst in the desert.

One of the biggest problems in the market is the number of people who were given homes and mortgages they could not afford. Naturally, Barack Obama’s first reaction was to just vaporize that debt with cram down mortgages, as if no one would notice the instant loss of capital, but we’re all friends, right? Now let’s remember that mortgages were being written with abandon primarily on the basis of race because those were the new rules and ample incentives were provided to make it all happen.

Yet how did Obama phrase it?

Families, he said, who “are being preyed upon by predatory lenders. If you’re protecting America, America should be protecting you from unfair bankruptcy laws.”

So let’s recap right here. Clinton, Rubin and Cuomo forced banks to make bad loans primarily on the basis of race, freed banks from responsibility, incentivized loan originators to provide these loans, pushed Fannie and Freddie to invest in these bad loans and now democrats and Obama blame the “predatory lenders” who did exactly as democrats wanted done.

Barack Obama’s plan was to force banks to forfeit the loans they were incentivized to make, resulting in loss of capital. If the banks were uncooperative, then Obama wanted to allow judges to force banks to forfeit capital.

That capital represented someone’s money.

The program was called HAMP. And how did it pan out?

Not so well.

The Obama administration’s flagship effort to help people in danger of losing their homes is falling flat.

More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes.

Last month alone,155,000 borrowers left the program — bringing the total to 436,000 who have dropped out since it began in March 2009.

And why is it failing? Stupidity.

A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Mother Jones attributed the failure to a number of reasons:

the program’s paltry results, Treasury’s efforts to move the goal posts for HAMP success, the disproportionate number of carrots and too few sticks in the program, and much more.

It never stops. The damage wreaked by one set of democrats is compounded by another set of democrats. Democrats made laws putting responsible, productive Americans on the hook for democrats’ fanciful visions of sugar plum fairies bestowing home ownership on those who could not afford them and would not pay for them and when that collapsed democrats once more demand that responsible, productive Americans pick up the tab for democrats’ largesse.

And that’s especially grating. Those of us who have conducted ourselves in a responsible manner and eligble for receive none of the benefits offered those who were something less than responsible. Incompetence is rewarded. Failure is subsidized. And Obama played the racial/poverty fiddle during his campaign, blaming everyone except for those truly responsible.

Obama has openly voiced his feelings in regards to foreclosure prevention and he has openly supported the bankruptcy bill throughout his campaign. He had also openly criticized lenders and Wall Street for predatory lending throughout his campaign, saying that many CEOs were paid for snookering the American people and paid to fail.

“Predatory lending” is the term democrats have invented to describe loaning institutions carrying out the wishes of democrats in a manner that makes it appear democrats had nothing to do with it.

Housing is either in or nearly in a double dip and there is no chance of recovery until the system is cleaned out. An alcoholic’s evolution offers a similar analogy. As long as the alcoholic is propped up and kept from finding the bottom, he or she will not recover.

Mark Steyn notes one of the geniuses behind these programs:

I’d ask one of Obama’s egghead economists to explain it to you simpletons, but unfortunately they’ve all resigned and returned to cozy sinecures in academia. The latest is chief economic advisor Austan Goolsbee, the genius who in 2007, just before the subprime hit the fan, wrote in The New York Times that this exciting new form of home “ownership” was an “innovation” that had “opened doors to the excluded” and was part of an “incredible flowering of new types of home loans.”

If you want a chuckle, read this from Obama’s website. Much of the story is there, but it omits Robert Rubin rewriting CRA, it omits Clinton pushing Fannie to buy subprime mortgages, it omits the tens of millions made by democrats acting as head of Fannie Mae while Fannie was circling the toilet and it omits Andrew Cuomo suing Accubanc for $2 billion because Accubanc was not making enough bad loans.

And here’s Obama’s explanation for why it all failed.

So why did so many people begin defaulting on their loans?

Because banks were reckless with their lending standards, they gave loans to people for houses these borrowers really couldn’t afford. Suddenly, feeling rich, those people pulled money out of their houses as if they were ATM machines and spent it, often on depreciating items like TVs or cars.

Good God! Banks were only doing what the damned democrats forced them to do! Barack Obama is and was always a stinking liar.

Andrew Cuomo is directly responsible for the housing crisis and as I once remarked, should be in jail instead of of the New York Governor’s mansion.

In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy. The GSEs don’t actually sell mortgages to borrowers. They buy them from banks and mortgage companies, allowing lenders to replenish their capital and make more loans. They also purchase mortgage-backed securities, which are pools of mortgages regularly acquired by the GSEs from investment firms. The government chartered these banks to pump money into the mortgage market and, while they did it, to make a strong enough profit to attract shareholders. That created a tug-of-war between their efforts to maximize shareholder value, which drove them toward high-end mortgages, and their congressionally mandated obligation to finance loans for those who needed help. The 1992 law required HUD’s secretary to make sure housing goals were being met and, every four years, set new goals for Fannie and Freddie.

Please read this carefully:

But raising the affordable-housing goals was only half the Cuomo story.

The HUD secretary is also required to produce voluminous rules that govern how the GSEs meet those goals, and the 187-page rules Cuomo issued opened the door to abuse.

The rules explicitly rejected the idea of imposing any new reporting requirements on the GSEs. In other words, HUD wanted Fannie and Freddie to buy risky loans, but the department didn’t want to hear just how risky they were.

HUD conceded in the rules that many consumer groups had urged it to insist that the GSEs provide “loan-level data” revealing how many of their loans contained high interest rates, prepayment penalties, or other requirements that presaged bad loans.

And as for those “predatory lending” YSP fees?

…it was Cuomo who issued a rule in 1999 that dozens of federal courts have since found legalized the yield-spread premiums. He was the first HUD secretary to say they were “not illegal per se,” nullifying most of the 150 class-action lawsuits against them filed across the country.

Because of Obama’s policies no one can afford to go where the jobs are:

But a Los Angeles Times story from yesterday suggests that even moving to Charlotte or Cleveland may be too expensive. The problem is not the prices of the homes where the jobs are, it’s the prices of the homes where the jobs aren’t:

Charles Mills can barely afford to stay here. But he also can’t afford to move.

That’s why the 44-year-old heavy-equipment operator was preparing to leave his wife and young daughter here and go where he could find work — the Oklahoma oil fields. Mills has a mortgage to pay, even if its size pains him.

He purchased his house in 2006 for $308,500. Current value: $105,797.

“We talked about it: What can we do with the house?” Mills said. “Nobody’s going to buy it. Nobody’s going to rent it. If we walk away, my credit’s shot. We’re stuck.”

I am likely to punch in the mouth the next person who blames “Bush policies” for this mess. Nothing will get better until Obama is gone and the market is allowed to cleanse itself and again become a reasonable investment opportunity.

Pointless Spending

Obama’s stimulus is a failure.

As usual for democrats, failure of a policy means it is worth repeating.

Krugman calls for second stimulus

Business strangulation

Barack Obama has made it known that he will not allow any business that is not unionized. His NLRB filed a complaint against Boeing to try to stop Boeing from opening a non-union plant in South Carolina. Tim Pawlenty likened this action to the Soviet Union circa the 1970’s.

Health Care

The cost of Obamacare is likely to exceed $2 trillion and as yet no one knows what’s in it. Its full effects have yet to be felt. Universal health care has failed pretty much everywhere it’s been instituted and once again, if something fails, democrats are determined to repeat it.

A recent study found that one in three employers are likely to drop health care coverage once Obamacare kicks in. The White House took issue with the report, citing Romneycare in Massachusetts. Romneycare is not working out the way it was intended. You might call it “unexpected.”

The 2006 reform jeopardized the solvency of private health plans in the Bay State. Unfortunately, insurers’ solvency is not something patients, physicians, and voters have reason to observe closely, so the political class suffers from perverse incentives once it starts micromanaging health insurance. As a result, higher costs have been passed on through higher per capita spending and premium growth.

According to the state’s 2010 annual report, today “per capita spending on health care in Massachusetts is 15 percent higher than the rest of the nation, even when accounting for wages and spending on medical research and education in Massachusetts.” Indeed, Professor John F. Cogan of Stanford University has concluded the 2006 reform led to premium growth 6 percent higher in Massachusetts than in the rest of the United States between 2006 and 2008.

And there’s more bad news:

Mr. Romney’s promise that getting everyone covered would force costs down also is far from being realized. One third of state residents polled by Harvard researchers in a study published in “Health Affairs” in 2008 said that their health costs had gone up as a result of the 2006 reforms. A typical family of four today faces total annual health costs of nearly $13,788, the highest in the country. Per capita spending is 27% higher than the national average.

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Fifty-six percent of Massachusetts internal medicine physicians no longer are accepting new patients, according to a 2009 physician work-force study conducted by the Massachusetts Medical Society. For new patients who do get an appointment with a primary-care doctor, the average waiting time is 44 days, the Medical Society found.
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The difficulties in getting primary care have led to an increasing number of patients who rely on emergency rooms for basic medical services. Emergency room visits jumped 7% between 2005 and 2007. Officials have determined that half of those added ER visits didn’t actually require immediate treatment and could have been dealt with at a doctor’s office—if patients could have found one.

Now democrats are determined to take this failure nationwide.

Finance

Dodd Frank is a failure. A summary of Dodd-Frank trumpets this:

ENDING TOO BIG TO FAIL BAILOUTS

No Taxpayer Funded Bailouts: Clearly states taxpayers will not be on the hook to save a failing financial company or to cover the cost of its liquidation.

No it doesn’t. Two of the most incompetent institutions, Fannie and Freddie, are exempt from Dodd Frank. Obama said that the cost of bailing out Fannie and Freddie was $130 billion. The CBO says the real cost of the bailout is $317 billion and F&F are expected to need another $42 billion over the next ten years.

Energy

During his campaign Obama promised to make our electric rates skyrocket.

When I was asked earlier about the issue of coal…under my plan of a cap and trade system, electricity rates would necessarily skyrocket…even regardless of what I say about whether coal is good or bad, because I’m capping greenhouse gasses, coal power plants, natural gas…you name it…whatever the plants were, whatever the industry was, they would have to retro-fit their operations.

That will cost money…they will pass that money on to the consumers.

And he is making good on that promise. His EPA-gone-nuts is shutting down coal power.

Utility giant American Electric Power said Thursday that it will shut down five coal-fired power plants and spend billions of dollars to comply with a series of pending Environmental Protection Agency regulations.

The company’s dramatic plan to comply with the regulations could give Republicans and moderate Democrats ammunition in their ongoing fight against EPA’s efforts to impose new regulations aimed at limiting greenhouse gas emissions and air pollutants including mercury and arsenic.

And with them go potentially hundreds of thousands of jobs.

It is argued that reduced pollution will be worth the cost, but that conclusion is based on legerdemain:

The agency estimates that the utility rule will cost $10.9 billion annually but will yield as much as $140 billion in total health and environmental benefits. Sounds like a deal. But most of those alleged benefits are indirect—i.e., not from the mercury reductions that the rule is supposed to be for. Rather, they come from pollutants (“airborne particles”) that the EPA already regulates under other parts of the Clean Air Act. A good analogy is a corporation double-counting revenue.

And it is going to be expensive.

Consumers could see their electricity bills jump an estimated 40 to 60 percent in the next few years.

The reason: Pending environmental regulations will make coal-fired generating plants, which produce about half the nation’s electricity, more expensive to operate. Many are expected to be shuttered.

If Obama remains in office, half of our energy sources for electricity will be gone.

The green jobs fantasy

Politico ran a story describing the underwhelming number of “green jobs.”

Green jobs success eludes President Obama

President Barack Obama heads to an energy plant in North Carolina on Monday to talk once again about the job-creating power of a green economy.

The catch? Nearly three years into Obama’s presidency, the White House can’t point to much solid evidence that significant numbers of Americans are scoring the green jobs the president has been touting.

Obama’s Council of Economic Advisers suggests 225,000 clean energy jobs were either created or preserved through the third quarter of 2010 thanks to more than $80 billion in the economic stimulus package. But those are estimates at best.

That’s $355,000 per job.

There’s something wrong with the title of the Politico story. Ah, I’ve got it.

“Green jobs success unexpectedly eludes President Obama”

There, I fixed it.

The White House figures 825,000 Americans should be building electric car batteries, retrofitting homes or doing other green collar work by the end of 2012. But that too is an extrapolation.

Car batteries, you say?

Electric cars could produce higher emissions over their lifetimes than petrol equivalents because of the energy consumed in making their batteries, a study has found.

An electric car owner would have to drive at least 129,000km before producing a net saving in CO2. Many electric cars will not travel that far in their lifetime because they typically have a range of less than 145km on a single charge and are unsuitable for long trips. Even those driven 160,000km would save only about a tonne of CO2 over their lifetimes.

The British study, which is the first analysis of the full lifetime emissions of electric cars covering manufacturing, driving and disposal, undermines the case for tackling climate change by the rapid introduction of electric cars.

And that company Obama is visiting? It’s Cree Inc. Cree got $39 million from the stimulus package. And what did it do with that money? It opened a plant in 2010.

In China.

Spain has learned a painful lesson about over-subsidization of green industry:

Zapatero introduced the subsidies three years ago as part of an effort to cut his country’s dependence on fossil fuels. At the time, he promised that the investment in renewable energy would create manufacturing jobs and that Spain could sell its panels to nations seeking to reduce carbon emissions.

Yet by failing to control the program’s cost, Zapatero saddled Spain with at least 126 billion euros of obligations to renewable-energy investors. The spending didn’t achieve the government’s aim of creating green jobs, because Spanish investors imported most of their panels from overseas when domestic manufacturers couldn’t meet short-term demand.

A new headline:

Obama pledges focus on job creation

As long as they are union jobs.

Barack Obama talks jobs, but everything he does kills jobs. Barack Obama talks business, but everything he does is bad for business, especially with business always waiting for the next shoe to drop. Every regulation, every new law- it’s all bad for the economy.

Barack Obama is destroying this country and there is absolutely no chance of recovery as long as he is in office.