Shocker: Yet another Obama “green economy” fail

posted at 8:48 am on July 8, 2010 by Ed Morrissey

What happens when one government intervention for social engineering meets another government intervention for social engineering?  Hilarity doesn’t exactly ensue, as the White House discovered when it attempted to exploit Fannie Mae and Freddie Mac to carry paper for its home-energy improvement program, part of Barack Obama’s “green economy” strategy.  The two GSEs issued a rare rebuke to the Obama administration and refused to play along, at least for the moment:

A White House-backed effort to encourage home-energy improvements was dealt a blow Tuesday after a federal regulator said the program posed significant risks to mortgage lenders and investors.

The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, suggested the mortgage finance titans should avoid participating in the program or should tighten their lending standards where the initiative moves forward.

The move could effectively torpedo the fledgling program that lets homeowners borrow money from their local governments to finance the high upfront costs of energy-efficient upgrades, like solar panels or efficient furnaces.

City and state leaders say the decision could put at risk a program they had hoped would boost jobs and conservation efforts.

Well, sure it does — and the White House has only itself to blame.  As the Wall Street Journal notes, the plan called for the Property Assessed Clean Energy (PACE) program to coordinate loans from states and local municipalities on special tax assessments to pay for expensive improvements on energy use (solar panels, for example) over a period of 15-20 years, and the state or local government sells bonds to cover the debt.  However, those who buy those bonds then become senior creditors, which means that they get paid first in any liquidation — and not the mortgage lender and its investors.

That presents a big problem for Fannie and Freddie.  The terms of their operations requires them to hold the senior position on any mortgages they buy or guarantee, in order to make the mortgage-backed securities (MBSs) more reliable financial instruments.  This is why FHFA says that Fannie and Freddie should refuse to participate, or at the worst only agree when the borrower has airtight credit and ability to pay off the loans.  Otherwise, it puts at risk the investors of the MBSs sold by allowing them to lose their first position on liquidation, and the last thing this economy needs is even more instability in those instruments.  And given the lending standards applied over the past twelve years by Fannie and Freddie, it’s a good bet that most of the homeowners participating in the PACE program may already be too extended to make for a good credit risk.

Now, it’s not as if the collapse of Fannie and Freddie was some arcane event only known by a few industry insiders, and not as though the MBS market somehow strengthened so much over the last couple of years that inducing more risk makes any sense at all.  After the disastrous results of previous government intervention with Fannie and Freddie and the poisonous effects of toxic MBS assets, the only efforts the government should be making in regard to Fannie and Freddie is extricating them from lending risk, not doubling down on it.  At the very least, one might have presumed that someone in the Obama administration might have researched the issue of senior positioning of PACE creditors and the impact it might have on the troubled GSEs.

Of course, this administration has shown little respect for senior creditors in the past, which is one of the reasons why investors aren’t all that keen on jumping into the market now anyway.  The WSJ reports that the Obama administration’s solution to this was to tell Fannie and Freddie to just reorder the creditor positioning, but the PACE investors won’t roll over like others have done in the past — mainly because the PACE investors are taxpayers to whom these state and local municipalities have to answer.

In short, this gives a strange sense of deja vu — and a disturbing sense that this White House is very clueless about economics and the law.


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In short, this gives a strange sense of deja vu — and a disturbing sense that this White House is very clueless about economics and the law.

We already knew that, but we haven’t really
learned it yet.

thgrant on July 8, 2010 at 8:52 AM

and a disturbing sense that this White House is very clueless about economics and the law

And what, exactly, relevance do those silly concepts have when we’re talking about the One’s Plans for our Imbettering?

Mr. Bingley on July 8, 2010 at 8:53 AM

This is what happens when your principles, politics, and morals are all “relative”…contradictory opinions are bound to collide with very ugly results.

englishqueen01 on July 8, 2010 at 8:54 AM

this White House is very clueless about economics and the law.

What? On economics and the law,
Giving unemployment checks will grow the economy, just like Nanny Pelosi concurred!
And it’s against the law to uphold immigration law in AZ!
/sarc

itsnotaboutme on July 8, 2010 at 8:55 AM

What is it called when you keep doing the same thing over and over again, expecting a different outcome? This is the Obama administration and congress.

Wills on July 8, 2010 at 8:55 AM

Isn’t this warning that social engineering would be economically dangerous by Fannie and Freddie tacit admission that our whole financial crisis was indeed caused by Democrats social engineering as we’ve been saying all along?

American Elephant on July 8, 2010 at 8:55 AM

FHFA is racist?

rbj on July 8, 2010 at 8:56 AM

…this White House is very clueless about economics and the law.

QOTD

publiuspen on July 8, 2010 at 8:56 AM

this White House is very clueless about economics and the law.

Isn’t this becoming a bit redundant at this point?

Good Lt on July 8, 2010 at 8:56 AM

should tighten their lending standards

Whoa! Now there’s an idea.

davidk on July 8, 2010 at 8:56 AM

Just an observation:

As I took advantage of the weatherization and home improvement programs in Tennessee, I noticed that ALL the contractors were African American companies and ALL the staff at the county level were African American….most of the assistance were slothful, perfunctory and required my constant demands for following through on promises to get anything done.

Only one of the contractors (the insulation guy) was truly a responsible guy with a good crew (they were quite good- ALL black BTW).

Now look beyond all these programs, including the recent broadband jobs initiative and I think we may have reparations/minority jobs programs. A transfer of wealth indeed for social engineering purposes.

rickyricardo on July 8, 2010 at 8:58 AM

I see another PhotoShop of dear leader for the movie Clueless….any takers?

cmsinaz on July 8, 2010 at 8:59 AM

its almost like central planning doesn’t work

rob verdi on July 8, 2010 at 9:01 AM

and a disturbing sense that this White House is very clueless about economics and the law.

This WH is clueless about everything..But i hear they know how to throw a party.

SHARPTOOTH on July 8, 2010 at 9:01 AM

mainly because the PACE investors are taxpayers to whom these state and local municipalities have to answer.

Therein lies the problem for ObaMao and his Chicago mafia. They have never been accountable, they have never had to answer for their hare-brained schemes.

However, those who buy those bonds then become senior creditors, which means that they get paid first in any liquidation — and not the mortgage lender and its investors

Just like the bondholders at GM and Chrysler, right?

onlineanalyst on July 8, 2010 at 9:08 AM

Øbama plans massive union funding to retrofit the major cities with green gizmos. I think he plans to run it all through FM/FM. Check out the Emerald Cities Collaborative . (It’s frightening as hell.)

petefrt on July 8, 2010 at 9:08 AM

Excellent Exposé, Ed.

However, those who buy those [PACE] bonds then become senior creditors, which means that they get paid first in any liquidation — and not the mortgage lender and its investors.

THAT is attorney Obama’s résumé specialty, pinstripe crime that rips off PUBLIC TAX FUNDED programs through legal corruption, à la Obama’s “community organizing” Altgeld Gardens scam that put ALL the tax funds designated for restoring public housing for the indigent elderly blacks into the legal pockets of investors who STRIPPED the housing of whatever value contained, leaving the project worse off than it was before Obama showed up with his hope and change.

Altgeld Gardens contained a great deal of asbestos in its construction materials – asbestos that remained there until a grassroots campaign in the 1980s advocated for its removal. US President Barack Obama, then a local community organizer, participated in this campaign, and wrote about it at length in his book Dreams From My Father. No new insulation was installed.

To report that nothing new was installed is worse than painting lipstick on a pig. The copper and all things of value were stripped from the premises. It all made for a coincidental episode of “The Sopranos”, though in Chicago union labor would have done the supervising lawyers’ ripoff dirty work.

maverick muse on July 8, 2010 at 9:10 AM

“When the people find they can vote themselves money, that will herald the end of the republic.”

Ben Franklin

PatriotRider on July 8, 2010 at 9:10 AM

You can bet that solar panels are not covered under your homeowner’s insurance, and will need a separate rider to cover them. If you put them on your house, make sure that you put them on your insurance, too. Otherwise, the next hailstorm will be a lot more expensive than expected.

You can bet that Obama and his gang never thought about the cost of the additional homeowner’s insurance, did they? Their cluelessness is breathtakingly appalling.

ss396 on July 8, 2010 at 9:11 AM

Now look beyond all these programs, including the recent broadband jobs initiative and I think we may have reparations/minority jobs programs. A transfer of wealth indeed for social engineering purposes.

rickyricardo on July 8, 2010 at 8:58 AM

Interesting observation.

davidk on July 8, 2010 at 9:11 AM

The only thing that is green about Obama’s “green economy” strategy is the color of your face once the thing kicks in and screws up your life!

pilamaye on July 8, 2010 at 9:11 AM

In short, this gives a strange sense of deja vu — and a disturbing sense that this White House is very clueless about economics and the law.

Oh, G’wan.

Do you mean to sit there, and tell us, piles of consumer debt held by FM&FM isn’t good economic practice?

Let’s roll the dice.

franksalterego on July 8, 2010 at 9:12 AM

A transfer of wealth indeed for social engineering purposes.

rickyricardo on July 8, 2010 at 8:58 AM

Yep, redistribution via unions is key to Øbama‘s Grand Green Design.

petefrt on July 8, 2010 at 9:14 AM

and a disturbing sense that this White House is very clueless about economics and the law

This is the place where audacity of hope comes into play. The crew of thugs dares anyone to call them on their lawlessness and stupidity. They are relying on sheepish fears of those who object. The race-card gambit always seems to work in order to quell dissent.

When ObaMao uses his strawmen, “There are those who say” or “The Republicans are being obstructionists to progress,” he is really revealing that he knows the logical objections to his policies. By making those objections appear to be flaws, he believes that he has won the debate.

onlineanalyst on July 8, 2010 at 9:16 AM

and now Obama wants his team’s infighting and petty drama to stop.

uh…uh..wait..sorry, that was a different bureaucratic turf war. Doesn’t apply here.

Skandia Recluse on July 8, 2010 at 9:16 AM

a disturbing sense that this White House is very clueless about economics and the law.

Ed, you fail to recall Obama’s FIRST job after “graduating” from Columbia, working for an international banking firm prior to Harvard Law School.

Don’t be so clueless with your final remark, please. It certainly detracts as unable to conclude a thought process, choosing to remain in limbo.

Later in 1981 he transferred to Columbia University in New York City, where he majored in political science with a specialty in international relations[27] and graduated with a B.A. in 1983. He worked for a year at the Business International Corporation, then at the New York Public Interest Research Group.

maverick muse on July 8, 2010 at 9:18 AM

Ho-hum,another fail?? How UNEXPECTED!

ohiobabe on July 8, 2010 at 9:18 AM

Here’s the challenge restated: Can anyone, anywhere, find someone, anyone, in this current Administration who actually knows something about anything?

Never before in the history of this great Nation have we peopled the White House with such a plethora of wasted skin.

Crusader Rabbit on July 8, 2010 at 9:19 AM

plethora of wasted skin.

Crusader Rabbit on July 8, 2010 at 9:19 AM
//
Hmmm,that sounds like obama voters to me.

ohiobabe on July 8, 2010 at 9:21 AM

The only thing that is green about Obama’s “green economy” strategy is the color of your face once the thing kicks in and screws up your life!

pilamaye on July 8, 2010 at 9:11 AM
//
Now that’s the truth and nothing but the truth….someone said it last week…his voters (and some who didn’t vote for him)are thinking it’s going to be okay,that the repubs were crying wolf but your staement is the reason,NOTHING HAS KICKED IN YET!

ohiobabe on July 8, 2010 at 9:25 AM

The Obama administration consists of a too many ideologically driven economic morons. But then look at Obama.

BuckeyeSam on July 8, 2010 at 9:26 AM

Does anyone know: Is anyone bringing suit against the feds for defying contract law and screwing the Senior Creditors with the UAW bankruptcy scam?

Buy Danish on July 8, 2010 at 9:27 AM

In short, this gives a strange sense of deja vu — and a disturbing sense that this White House is very clueless about economics and the law.

In other news, bears crap in the woods and the Pope wears a hat!

csdeven on July 8, 2010 at 9:31 AM

The Obama administration consists of a too many ideologically driven economic morons. But then look at Obama.

BuckeyeSam on July 8, 2010 at 9:26 AM
Exactly…little obamas.

ohiobabe on July 8, 2010 at 9:31 AM

Does anyone else smell Van Jones manipulation behind these schemes?

onlineanalyst on July 8, 2010 at 9:34 AM

I’ll tell you what I smell, besides Ole BO, I smell reparations.
There is a claim that Ole BO is surrounded by players who firmly believe in raparations and want them instituted to the point of wanting the SE US as payment.
I find reparations ridiculous, but apparently I should rethink my attitude because some of this stuff is really pointing to this topic being hand in hand with Obama’s march to socialism.

ORconservative on July 8, 2010 at 9:53 AM

Come on. Fannie and Freddie are fundamentally sound. Just ask Barney Frank.

LASue on July 8, 2010 at 9:53 AM

Obama’s first employer has become The Economist Intelligence Unit.

Of course Obama knows what he’s doing with our economy. Our presidents have locked working Americans below board on the Keynes’ TITANIC as an undesirable and “undeserving” lot. Certainly, Obama bears no “Captain’s Honor Code” since HE is not going down with the nation’s economic ship though he ordered into destruction.

Whether he admits it to himself or not, Obama is all about usurping American management in order to un-empower this nation, to force us into the hands of his owning sponsors whose vested interests do NOT coincide with our Constitutional Governance, nor with free trade or private property rights of the undesirable and “undeserving” lot of independent workers and intellectuals free of corrupt union ownership.

Don’t hold your breath waiting to see result after each catastrophe, as in the moment. Obama’s meddling enables the Gulf Gusher to worsen each moment, eliminating our natural resources, distancing responsibility through legal maneuvers designed to placate the public while engorging the Gulf in ruin.

/NO American President worth his salt would have allowed ANY corporation to neglect MANDATED inspections from his own officials. Obama’s administration did allow government officials to fail their job descriptions by approving the lack of inspections mandated by law. Regardless of national security measures discussed, Obama’s policy strengthens domestic government employees’ REFUSAL to fulfill their job descriptions except to SELECTIVELY harass those who fully comply. That encourages noncompliance from the corrupt, which is seen elsewhere through DHS refusal to target guilty radical Jihadist Terrorists in America for prosecution PRIOR to and SUBSEQUENT to the slaughter of Americans EVEN AT FT. HOOD, or to prosecute the New Black Panthers guilty of voter intimidation and hate speech to “Kill Crackers”, or for the US Attorney General to sue the State of AZ rather than protect American citizens from the illegal alien invasion from terrorist Mexican drug cartels with murderous human smugglers.

Obama certainly knows what he is doing. And for the first time in Michelle’s adult life, she was proud of her country for promoting Marxism through her husband’s leadership to quell loyal opposition by distancing citizens from our Constitution, just as our MSM, educators and youth are already. By choice, the public already consumes far too many mind altering pharmaceuticals. (It should be interesting to note exactly how ObamaCare will deal with that issue, mandating consumption of tranquilizers or anti-depressants?)

maverick muse on July 8, 2010 at 9:57 AM

Come on. Fannie and Freddie are fundamentally sound. Just ask Barney Frank.

LASue on July 8, 2010 at 9:53 AM

And Maxine Waters…and Franklin Raines

onlineanalyst on July 8, 2010 at 10:01 AM

ORconservative on July 8, 2010 at 9:53 AM

That would be just like Brutus Obama to ruin the SE before handing it over as reparations, were reparations to transpire.

maverick muse on July 8, 2010 at 10:01 AM

What is it called when you keep doing the same thing over and over again, expecting a different outcome?

Liberalism.

englishqueen01 on July 8, 2010 at 10:04 AM

Yeah, pretty soon there won’t be anything left of the Gulf States and Ole BO will have smooth sailing.
HEY! didn’t think of it but MO could be queen.
I’m just kidding……………..kind of.

ORconservative on July 8, 2010 at 10:06 AM

The Obama administration consists of a too many ideologically driven economic morons. But then look at Obama.

BuckeyeSam on July 8, 2010 at 9:26 AM

“I am not an ideologue.”–BHO

He may as well recant Marxism.

maverick muse on July 8, 2010 at 10:06 AM

maverick muse: What you observe is so depressing and so true. It is just so difficult for most Americans to grasp the malevolent hostility that ObaMao and his enablers have unleashed.

onlineanalyst on July 8, 2010 at 10:06 AM

At the very least, one might have presumed that someone in the Obama administration might have researched the issue of senior positioning of PACE creditors and the impact it might have on the troubled GSEs.

Sadly, the Obama Administration’s propensity is to shoot first and ask questions later. Historical precedence, even of the most recent nature during Obama’s own occupation of the White House, is largely ignored and/or overlooked if it does not fit the agenda of whatever is driving his current focus and locus.

KendraWilder on July 8, 2010 at 10:09 AM

Does anyone else smell Van Jones manipulation behind these schemes?

onlineanalyst on July 8, 2010 at 9:34 AM

Your skin will crawl:

Van Jones is a globally recognized, award-winning pioneer in human rights and the clean-energy economy.

Nothing like hype with coffee.

maverick muse on July 8, 2010 at 10:09 AM

and a disturbing sense that this White House is very clueless about economics and the law.

But I thought he was one of the smartest Harvard Law School graduates evah.

Tin foil hat on: When is there going to be an investigation into Harvard Law School for allowing someone to take Barry’s classes and exams for him?

chemman on July 8, 2010 at 10:10 AM

9:34 AM
GLOBALLY recognized because for Van Jones, internationally renowned just doesn’t suffice. But “globally recognized” conjures a mental image of a totally rotund man–like Gore.

maverick muse on July 8, 2010 at 10:11 AM

chemman on July 8, 2010 at 10:10 AM

…For passing the likes of Hillary who took her own exams.

maverick muse on July 8, 2010 at 10:12 AM

current focus and locus.

KendraWilder on July 8, 2010 at 10:09 AM

Great conclusion.

(Imagine what focus and locus conjures in the mind of a child during a bedtime story. A Harry Potter chant.)

maverick muse on July 8, 2010 at 10:17 AM

ss396 on July 8, 2010 at 9:11 AM

You are correct. I live in a very rural area where you either use solar or generators to power your house. I had to submit all kinds of information to get a rider to cover my solar system.

chemman on July 8, 2010 at 10:18 AM

This is what happens when your principles, politics, and morals are all “relative”…contradictory opinions are bound to collide with very ugly results.

englishqueen01 on July 8, 2010 at 8:54 AM

Back when I was a pledge at a fraternity in college, I had to learn this rhyme — the mists of time have fogged my memory — about a bird that flew in an ever-diminishing spiral until it was eventually consumed by it’s own a**hole.

..who knows? Maybe we’ll wake up on January 21st, 2013 and all that will be left of this government will be a rotting remains a la War of the Worlds.

The War Planner on July 8, 2010 at 10:28 AM

ss396 on July 8, 2010 at 9:11 AM

You are correct. I live in a very rural area where you either use solar or generators to power your house. I had to submit all kinds of information to get a rider to cover my solar system.

chemman on July 8, 2010 at 10:18 AM

Hey, they’re busy taking over health insurance…why not home owner’s insurance..auto insurance??? All Insurance?? Why not?

Seriously…is there anything Obama has done that hasn’t turned to $hit??

BigWyo on July 8, 2010 at 10:30 AM

this White House is very clueless about economics and the law.

Not really. They just believe that economics and the law ARE WHAT THEY SAY IT IS.

GarandFan on July 8, 2010 at 10:33 AM

Why would any sane person invest in this scheme when the economy isn’t getting any better and no jobs are being added in the private sector. Home buyers are a shaky investment vehicle as they are still walking away from mortgages. Clueless indeed!

Kissmygrits on July 8, 2010 at 10:35 AM

Green Loans scheme to be replaced by Green Start program
THE troubled Green Loans program will be replaced after scathing reports on the scheme found widespread compliance problems and cost blowouts.
Climate Change Minister Penny Wong has released the reports on her department’s website today and announced the program will be phased out in coming months in favour of the new Green Start scheme.

J_Crater on July 8, 2010 at 10:35 AM

In short, this gives a strange sense of deja vu — and a disturbing sense that this White House is very clueless about economics and the law.

Exactly right!

If we were to give Obama $10, and told him to go buy a carton of milk, and some bread, and bring back the change….chances are he’d come back with some magic beans.

capejasmine on July 8, 2010 at 10:46 AM

and a disturbing sense that this White House is very clueless about economics and the law.

1. Knowledge of economic principles and the law is irrelevant
2. Rules are for chumps
3. Our ideas are brilliant
4. Feelings trump reason

ya2daup on July 8, 2010 at 11:02 AM

I wonder how long these idiots would last in a game of Sim City?

Sharke on July 8, 2010 at 11:03 AM

If we were to give Obama $10, and told him to go buy a carton of milk, and some bread, and bring back the change….chances are he’d come back with some magic beans tees.

capejasmine on July 8, 2010 at 10:46 AM

Goofing through golf trumps everything with this guy.

ya2daup on July 8, 2010 at 11:04 AM

Øbama plans massive union funding to retrofit the major cities with green gizmos. I think he plans to run it all through FM/FM. Check out the Emerald Cities Collaborative . (It’s frightening as hell.)

Yup….while the Republican right has been sleeping for the last 25 years, the progressive left has been doing their homework and laying the groundwork for a quiet coup.

The result are a massive infrastructure of public employee unions,”non-profits”and community organizing/socialist organizations that are out to destroy our system in the name of “justice”.

Check out the new speak, the buzz words and obfuscating/feel good phrases in order to mask their agenda.

Frightening indeed.

All the reason why the Republicans and the Tea Parties had better start electing ideologues who are ready to take no prisoners, because the water is now out of the tub and RINOS have no ability to excise this growing cancer..

rickyricardo on July 8, 2010 at 11:34 AM

From the link…

Tuesday’s announcement followed a letter from Reps. Henry Waxman (D., Calif.) and Barney Frank (D., Mass.) calling on government agencies to seek an outcome that would allow the programs to continue without putting taxpayers or mortgage investors at risk.

Oh, so you wan to do more borrowing but don’t put any lenders at any risk, and don’t check who is borrowing or if they can pay it back? Brilliant plan, but it doesn’t go far enough.

Why not require the plan to keep lenders rates at 1% interest, and have a 200% profit margin for Fan & Fred as well; since clearly the number, facts, or simple reality has no bearing on these requests?

Oh, and give everyone who takes one of these loans a flying car… that’ll get it moving again.

gekkobear on July 8, 2010 at 11:41 AM

Possession is nine tenths of the law. Obama has the keys in a way no previous person had them. I expect a new PACE czar or equivalent to try to ram this through.

FDR got away with evading the law also. His most celebrated action was court packing. That came asunder. Maybe we are due to have Obama’s illegal actions start to fail.

burt on July 8, 2010 at 11:43 AM

…a federal regulator said the program posed significant risks to mortgage lenders and investors.

In other words, Fannie and Freddie are SHUT DOWN?
Oh…wait a minute…

Amendment X on July 8, 2010 at 12:23 PM

The “green” they’re talking about is money. Money for them, not us.

LarryG on July 8, 2010 at 1:40 PM

Build. Nuclear. Power plants.

But me being rather tin foil hattish concerning the BP disaster and its timing, I suspect another Three Mile Island should the nuclear power plant building chorus get too loud.

Dr. ZhivBlago on July 8, 2010 at 2:03 PM

Obamanomics is the most unsustainalbe concept that ever came along.

seven on July 8, 2010 at 2:16 PM

No problem – we’ll just tell the secured creditors to go screw themselves and give half the houses to the UAW.

mojo on July 8, 2010 at 2:31 PM

In short, this gives a strange sense of deja vu — and a disturbing sense that this White House is very clueless about economics and the law.

Clueless like a Con-Man, Crazy like a Marxist.

Maquis on July 8, 2010 at 3:19 PM

When ObaMao uses his strawmen, “There are those who say” or “The Republicans are being obstructionists to progress,” he is really revealing that he knows the logical objections to his policies. By making those objections appear to be flaws, he believes that he has won the debate.

Astute observation. Similar to when the Left accuses people of doing something, it’s projection of what they do.

YehuditTX on July 8, 2010 at 11:50 PM