Where Is the Outrage? The Mugging of the Five Mortgage Lenders

I try to watch Fox News’ The Panel every evening. Charles Krauthammer usually gets things right. That is a comfort.

Today’s big news was Obama’s announcement that the U.S. Attorney General and 49 states’ Attorneys General had strong armed five large mortgage lenders into a $25 billion settlement. In effect, the $25 billion blackmail will be used to rewrite the terms of mortgages of underwater homes and pay penalties to owners who have already lost their homes.

My big disappointment: Krauthammer did not express outrage but, in effect, credited Obama with a significant political victory. He did not see this as an attack on free enterprise or the rule of law.

Obama, in his announcement to the press, preened that he stands on the side of social justice and for the little man and against the villainous banking industry. He is single handedly leveling the playing field.

I guess the Obama administration expects the $25 billion bailout to pump up home prices and lend new life to the housing market. The principal relief and reduced interest payments will only keep underwater homes off the market a little longer. They will not raise home prices. Instead of the home market clearing, it will continue in disequilibrium who knows how much longer.

Most “good deeds” of the Obama administration carry with them unanticipated consequences. The $25 billion blackmail plus the threat of potential criminal prosecution of lenders send a rather chilling message to mortgage lenders. The best way to stay out of trouble is to make no mortgage loans. In the absence of home loans, housing prices will not recover. The housing industry lives from credit. Without it, it is dead.

The public will not realize that this lies in store for a year or two. By then the election is over, one way orthe other.

If we play this game out, a second Obama administration would have to coerce reluctant lenders to make mortgage loans with threats, quotas, and additional repression.

By the time we see this, we are stuck with another four years.

Holder’s New Bluster: The Fraud Task Force on Gas Prices

Strapped American families can rest easy. On Thursday April 21, Attorney General Eric Holder Attorney rode to our rescue with the following announcement:

“Rapidly rising gasoline prices are pinching the pockets of consumers across the country. We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity. If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action.”

Holder’s new Financial Fraud Enforcement Task Force Working Group (acronym FFETFWG) will protect us from the sinister forces that raise gas prices by “monitoring oil and gas markets for potential violations of criminal or civil laws to safeguard against unlawful consumer harm.”

I guess Uncle Sam is in the business of deciding what is a “just” price of gas!

Holder’s announcement sent me to Google to download the last 120 months of data on U.S. crude oil and gas prices. As a patriot, I should assist him in this worthy investigation of gas price gouging.

Here is what I learned from my 30-minute investigation:

1) Gas prices are determined about 72 percent by oil prices. On average, for every plus or minus dollar change in crude, the gas price changes plus or minus 2.5 cents.

2) Factors other than crude prices, such as weather, economic conditions, consumer hoarding, expectations, and random factors explain the other 28 percent. How in the world will Holder’s agents sort out the fraud they have been charged to find from these other factors? I do not envy them in their task.

3) In some cases, a dollar increase in crude raises the gas price by more than 2.5 cents, and a dollar drop in crude lowers the gas price by less than 2.5 cents. (Aha: We seem to have evidence of chicanery!) But in almost as many cases, the rascally oil giants raise the gas price by less than 2.5 cents and lower the gas price by more than 2.5 cents. (I guess they do this to throw the Holder Fraud detectives off their scent).

My main finding is that the Holder fraud-seekers should expand their portfolio to investigate “cases of the unlawful and artificial holding down of retail gas prices.”

If “Big Oil” does not always pass crude price increases fully on to the gas consumer, Holder’s agents should track down cases of “unlawful” holding down of gas prices for the purpose of discouraging alternative green fuels. They could perhaps find some Saudi Sheikhs behind this sinister plot. We might as well throw this into the mix as well.

Attorney Generals should do what Attorney Generals are supposed to do. There is no point to his Fraud Task Force other than to intimidate, to score political points, and to shakedown campaign contributions.