Fudup
5th August 2010, 08:05 PM
http://www.investors.com/NewsAndAnalysis/Article/542795/201008051900/A-Mortgage-Rescue-In-Every-Pot.aspx
Buying Votes: It appears that Democrats will receive a severe beating in the fall elections. What can save them? How about the administration wiping out large swaths of debt for underwater mortgage holders?
James Pethokoukis, a Reuters columnist who once wrote for IBD, reported Thursday that the White House might have an August Surprise in the works.
"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," Pethokoukis wrote in Reuters' Political Risk blog.
As Pethokoukis notes, with 15 million mortgages — one in five — upside down, there is $800 billion in negative equity out there. That's a lot of money to forgive — and a lot of voters to sway toward the president's party.
Pethokoukis didn't dream up the idea during a fitful nap in some anti-Obama swamp. He's based it on four points:
1) "Republican leaders," he wrote, "believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus."
2) "Wall Street banks are alerting their clients privately to this possibility."
Pethokoukis refers to a July 16 Goldman Sachs memo that says policy shifts at government-sponsored enterprises such as the mortgage giants Fannie and Freddie "are one of a dwindling number of policy levers the administration has left to pull, so it is conceivable that changes could be made."
3) "The nascent recovery is already running out of steam," with second-quarter GDP growth being downgraded and Treasury Secretary Timothy Geithner issuing a warning that the jobless rate might go up before it goes down. The White House, also motivated by low approval ratings, therefore needs a "mortgage Hail Mary."
4) The White House is not worried about financial market reaction to a debt forgiveness plan. If the administration thought a $200 billion stimulus would pass Congress, Pethokoukis believes it would be submitting one "right now" with no regard to how Wall Street might respond. So Obama isn't going to care what the markets think about him manipulating Fannie Mae and Freddie Mac for political purposes
What think ye? Would the resulting forced losses crash the banks?
If true, that could really be a big shtf.
Buying Votes: It appears that Democrats will receive a severe beating in the fall elections. What can save them? How about the administration wiping out large swaths of debt for underwater mortgage holders?
James Pethokoukis, a Reuters columnist who once wrote for IBD, reported Thursday that the White House might have an August Surprise in the works.
"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," Pethokoukis wrote in Reuters' Political Risk blog.
As Pethokoukis notes, with 15 million mortgages — one in five — upside down, there is $800 billion in negative equity out there. That's a lot of money to forgive — and a lot of voters to sway toward the president's party.
Pethokoukis didn't dream up the idea during a fitful nap in some anti-Obama swamp. He's based it on four points:
1) "Republican leaders," he wrote, "believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus."
2) "Wall Street banks are alerting their clients privately to this possibility."
Pethokoukis refers to a July 16 Goldman Sachs memo that says policy shifts at government-sponsored enterprises such as the mortgage giants Fannie and Freddie "are one of a dwindling number of policy levers the administration has left to pull, so it is conceivable that changes could be made."
3) "The nascent recovery is already running out of steam," with second-quarter GDP growth being downgraded and Treasury Secretary Timothy Geithner issuing a warning that the jobless rate might go up before it goes down. The White House, also motivated by low approval ratings, therefore needs a "mortgage Hail Mary."
4) The White House is not worried about financial market reaction to a debt forgiveness plan. If the administration thought a $200 billion stimulus would pass Congress, Pethokoukis believes it would be submitting one "right now" with no regard to how Wall Street might respond. So Obama isn't going to care what the markets think about him manipulating Fannie Mae and Freddie Mac for political purposes
What think ye? Would the resulting forced losses crash the banks?
If true, that could really be a big shtf.