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.
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.
