FHFA refuses to mark down principal on home loans

posted at 3:41 pm on August 2, 2012 by Ed Morrissey

This key news item got overlooked earlier this week, but it’s worth flagging now.  The Obama administration had hinted that they might use their leverage through the Federal Housing Finance Agency (FHFA) to reduce principal amounts on home loans that are currently underwater, ostensibly as an economic stimulus but mostly as a political stimulus to Barack Obama’s re-election hopes.  FHFA chief Edward DeMarco put the kibosh on that plan, arguing that it would set up perverse incentives that could inflict a lot more damage than it would repair.  The Washington Post notes the rebuke to the White House in this decision — and that the White House didn’t take it lying down, either:

The federal regulator for government-backed mortgage giants Fannie Mae and Freddie Mac said Tuesday that he will not allow the firms to reduce loan balances of struggling homeowners, frustrating the Obama administration as it looks for ways to boost a floundering economy.

Edward J. DeMarco, acting director of the Federal Housing Finance Agency (FHFA), said the agency’s analysis showed no sure-fire financial benefit to letting some mortgage holders reduce their loan amounts. He also warned that such a move could cause some borrowers to default intentionally in hopes of getting taxpayer aid. …

Treasury Secretary Timothy F. Geithner chastised DeMarco for his decision in a letter Tuesday, even as he acknowledged DeMarco’s right to forbid principal reduction in his role as independent regulator for Fannie and Freddie.

“Five years into the housing crisis, millions of homeowners are still struggling to stay in their homes and the legacy of the crisis continues to weigh on the market,” Geithner wrote. “You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis.”

Geither argued that a principal-reduction plan might save taxpayers $1 billion, and Fannie Mae and Freddie Mac close to $4 billion.  DeMarco responded by saying that was true — under the most optimistic scenario possible.  DeMarco decided that the incentive to default and rely on government aid for principal reduction would be too attractive an incentive for more homeowners than necessary, and that the damage done to the market might be incalculable:

DeMarco reiterated his concern about the potential long-term consequences of principal forgiveness, saying that rewriting valid contracts could spook investors, encourage bad behavior on the part of homeowners and increase mortgage costs in the future. “It’s an important thing for us, the policymakers, to weigh,” DeMarco said, even as he acknowledged that such effects are “not readily measurable.”

Diana Olick noted the reasoning in more detail for CNBC:

DeMarco concludes that the program presents the risk of more losses to taxpayers, not to mention operational challenges to the GSE’s. He cites moral hazard, suggesting that as many as 19,000 borrowers who are current on their mortgages could strategically default in order to qualify for debt forgiveness. Even more significant, he goes on, could be long-term consequences for mortgage credit availability.

“Fundamentally, principal forgiveness rewrites a contract in a way that other loan modification programs do not. Forgiving debt owed pursuant to a lawful, valid contract risks creating a longer-term view by investors that the mortgage contract is less secure than ever before,” writes DeMarco in the letter to lawmakers.

Not only that, DeMarco and Olick noted, but the supposed savings are mostly a shell game:

The FHFA estimates that up to 500,000 Fannie and Freddie borrowers could have been eligible for principal reduction. The Treasury’s current program pays lenders large incentives to write down loan balances, using unspent money from the $700 billion TARP (Troubled Asset Relief Program). But FHFA says despite a positive financial benefit to Fannie and Freddie, it is really just a transfer of taxpayer funds, adding “to the over $188 billion in taxpayer support the Enterprises have already received.”

Olick also hears grumbling on Capitol Hill in reaction to DeMarco’s decision, and we may yet see legislation to force DeMarco’s hand.  Of course, this is exactly what the lending markets don’t need — more instability for investors, and more government interventions to change the terms of their investments ex post facto. If the government insists on forcing a write-down on existing mortgages, fewer investors in the future will put their capital at risk in this market, which will make lending much more difficult and further discourage any risk-taking.  Washington politicians have already been complaining about reluctance on the part of lenders to make loans except under minimal-risk scenarios, and an intervention will only reinforce those strategies.

DeMarco got this right, but don’t expect him to get any credit for it with the same people who brought us the 1998-2008 housing bubble in the first place.


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The left is up in arms over this and want Obama to take Demarco’s head. I dont think Obama will take long to do this.

William Amos on August 2, 2012 at 3:45 PM

…our program works!

KOOLAID2 on August 2, 2012 at 3:46 PM

Wealth transfer schemes like this do not save taxpayers money

They simply destroy or redistribute.

I hate these scumbags.

tom daschle concerned on August 2, 2012 at 3:46 PM

The Nation already called for his head.

I have seen several Democratic Senators and Congressman critisize him as well.

William Amos on August 2, 2012 at 3:46 PM

Let’s see if Republicans will hold firm.

This is nothing more than a scheme to buy votes.

BD57 on August 2, 2012 at 3:48 PM

Funny, I still remember Ed being all giddy over this when McCain proposed it in the 2008 debates.

lorien1973 on August 2, 2012 at 3:53 PM

This is absolutely no surprise coming from a President and administration that threw out centuries of bankruptcy and contracts laws during the Chrysler bankruptcy.

First lien holders rights were tossed along with non-union worker pension plans under solid contracts.

Rule of Law? WHAT’S THAT?

Opposite Day on August 2, 2012 at 3:55 PM

THIS is what happens when you have GSEs. Can anyone imagine a private mortgage company’s board even having this conversation with the CEO? Didn’t think so.

weaselyone on August 2, 2012 at 3:55 PM

Reducing principal = criminalizing government.

PattyJ on August 2, 2012 at 3:58 PM

he will not allow the firms to reduce loan balances of struggling homeowners, frustrating the Obama administration as it looks for ways to boost a floundering economy Obama re-election campaign.

AZCoyote on August 2, 2012 at 3:58 PM

A house being underwater has absolutely NO relationship to ones ability to pay for it. Being upsidedown on a mortage is no reason to forgive a portion of the mortage.

Jabberwock on August 2, 2012 at 3:58 PM

A house being underwater has absolutely NO relationship to ones ability to pay for it. Being upsidedown on a mortage is no reason to forgive a portion of the mortage.

Jabberwock on August 2, 2012 at 3:58 PM

Car loans are indignant!

lorien1973 on August 2, 2012 at 3:59 PM

The left is up in arms over this and want Obama to take Demarco’s head. I dont think Obama will take long to do this.

William Amos on August 2, 2012 at 3:45 PM

This.

Bambi desperately wants to give bread and circuses to people in lefty enclaves and swing states to turn out.

Per Zillow, the portions of the US with the highest rates of underwater loans are the west coast, the DC beltway, the Florida-Georgia area, and the Rust Belt states like Ohio, Michigan, and Illinois.

He figures that offering a way out of underwater loans will make his base happy and possibly buy off enough swing-state voters to get him re-elected.

teke184 on August 2, 2012 at 4:00 PM

A house being underwater has absolutely NO relationship to ones ability to pay for it. Being upsidedown on a mortage is no reason to forgive a portion of the mortage.

Jabberwock on August 2, 2012 at 3:58 PM

That’s true unless you are trying to sell it.

Night Owl on August 2, 2012 at 4:01 PM

A lot of the foreclosed houses have extensive damages. You wonder what sort of irresponsible people they are. They have felt no responsibility for what they had borrowed, and on top of that, often they wrecked havoc on the house, on top of defaulting on their mortgage. They have no conscience and the present mess is a result of the Dems forcing banking institutions to forgo standards, and gave them ill-advised loans.

bayview on August 2, 2012 at 4:01 PM

Of course, this is exactly what the lending markets don’t need — more instability for investors, and more government interventions to change the terms of their investments ex post facto.

They don’t need it, that’s why they’ll get it from Hussein !

burrata on August 2, 2012 at 4:02 PM

They will try to write down mortgages using eminent domain on the mortgage itself. It’s starting in CA.

Here and Here

Oil Can on August 2, 2012 at 4:03 PM

Call it redistribution. Call it wealth transfer.

Just Obama buying more votes to reelect his raggedy backside with our taxpayer money.

marybel on August 2, 2012 at 4:04 PM

They will try to write down mortgages using eminent domain on the mortgage itself. It’s starting in CA.

Here and Here

Oil Can on August 2, 2012 at 4:03 PM

The bankrupt city of San Bernadino is attempting this and getting smacked down over it, IIRC.

teke184 on August 2, 2012 at 4:05 PM

You haven’t been able to keep current on your mortgage because you wouldn’t/didn’t want to give up your extras and my family has scrimped in order to pay that bill – one of us is going to get the outstanding balance reduced and one of us is going to get shafted?
Way to reward people for screwing up.

katiejane on August 2, 2012 at 4:07 PM

Dear Mr. Geither, please inform your boss that doing wrong is wrong, if he remembers what that really means. Doing bad things causes bad consequences-not good ones.

He might best help the struggling homeowner by stopping his war on the American economy that robust jobs will increase money in everyone’s hands, attracting more home buyers, give jobs to those struggling and save the nation. But what would I know compared to a community organizer?

Don L on August 2, 2012 at 4:07 PM

A house being underwater has absolutely NO relationship to ones ability to pay for it. Being upsidedown on a mortage is no reason to forgive a portion of the mortage.

Jabberwock on August 2, 2012 at 3:58 PM

That’s true unless you are trying to sell it.

Night Owl on August 2, 2012 at 4:01 PM

Still not a reason to forgive part of the mortgage. If you owe more than you can sell it for, that’s tough cookies. That’s the market. Sucks, but them’s the breaks.

Bitter Clinger on August 2, 2012 at 4:08 PM

Car loans are indignant!

lorien1973 on August 2, 2012 at 3:59 PM

Just so !
And most people do not give it a second thought.

Jabberwock on August 2, 2012 at 4:09 PM

fewer investors in the future will put their capital at risk in this market, which will make lending much more difficult and further discourage any risk-taking.

Q: So what will these investors do with their capital ?
A: Hoard it . Stash it. Save it .

Which makes it easy for Hussein to confiscate it .
Read up folks, every dictator in history has gone after
” money hoarders” , Hussein ‘s end game is not mortgage modification but
looting the “rich” , or as he calls them, millionaires and billionaires with private jets who are successful not because they are smart and work hard but because his union thugs build roads and bridges

burrata on August 2, 2012 at 4:11 PM

The bankrupt city of San Bernadino is attempting this and getting smacked down over it, IIRC.

teke184 on August 2, 2012 at 4:05 PM

I wish they were. They are going to cite Kelo. Thank you Souter.

Oil Can on August 2, 2012 at 4:14 PM

Why the flugelhorn do we even have an FHFA?

The market is taking care of marking down principal, and would have done so more completely and effectively by now if not for all the tinkering by the Obama administration and Congress.

Let the market do what it does best, and make the federal government stop trying to issue ukases from Lala-land. The government forcibly writing down principal on underwater loans would suck lendable capital out of the economy more effectively than anything has to date.

And yes, I have an underwater loan. So I have a very real stake in this. Don’t do it.

J.E. Dyer on August 2, 2012 at 4:14 PM

Q: So what will these investors do with their capital ?
A: Hoard it . Stash it. Save it .

Which makes it easy for Hussein to confiscate it .

burrata on August 2, 2012 at 4:11 PM

^ Why I’m so nervous about putting money in banks.

Starting a rev-O-lution is still rather far-fetched – why run all the risks of it literally blowing up in his face if he can just grab power ‘legally’ – but a wealth confiscation? Not nearly as much.

MelonCollie on August 2, 2012 at 4:14 PM

but a wealth confiscation? Not nearly as much.

MelonCollie on August 2, 2012 at 4:14 PM

I still remember that a judge was assasinated in Tucson AZ . I need to do some research on what exactly he was working on , just before he was killed.

burrata on August 2, 2012 at 4:21 PM

Why the flugelhorn do we even have an FHFA?
J.E. Dyer on August 2, 2012 at 4:14 PM

Flugelhorns are offended and say you’ve got a lot of brass to trumpet their name in vain.

rlyle on August 2, 2012 at 4:22 PM

Why the flugelhorn do we even have an FHFA?

The market is taking care of marking down principal, and would have done so more completely and effectively by now if not for all the tinkering by the Obama administration and Congress.

Let the market do what it does best, and make the federal government stop trying to issue ukases from Lala-land. The government forcibly writing down principal on underwater loans would suck lendable capital out of the economy more effectively than anything has to date.

And yes, I have an underwater loan. So I have a very real stake in this. Don’t do it.

J.E. Dyer on August 2, 2012 at 4:14 PM

Amen!!

Government never makes things better.

Bitter Clinger on August 2, 2012 at 4:22 PM

Flugelhorns are offended and say you’ve got a lot of brass to trumpet their name in vain.

rlyle on August 2, 2012 at 4:22 PM

Hey, that’s terrible! That’s so bad it could’ve come from me! (just ask my GF)

MelonCollie on August 2, 2012 at 4:23 PM

PayGo!?!?!?!

Bmore on August 2, 2012 at 4:23 PM

Who in their right mind could believe that a mark down on principal is going to stimulate the market. There will always be certain risk in any investment and the worse possible scenario would be for the government to change contract law based on a knee jerk reaction to get votes.

DDay on August 2, 2012 at 4:24 PM

Do they actually know where these notes really are? I’d think that pretending to own a property and then getting “free money” from the Gov’t would be a pretty good scam…they could also launder other money and engage in drug trafficking, but now I’m just being silly./

Dr. ZhivBlago on August 2, 2012 at 4:27 PM

Still not a reason to forgive part of the mortgage. If you owe more than you can sell it for, that’s tough cookies. That’s the market. Sucks, but them’s the breaks.

Bitter Clinger on August 2, 2012 at 4:08 PM

I wasn’t saying it was. I was saying that it does have something to do with the problem. You can’t transfer title to a property with the original lien in place. If you are short $50,000 at closing you can’t sell unless you bring that $50,000 with you. If you lost your job and are trying to sell a house you can no longer afford, yet you can’t sell it because you don’t have $50,000 to bring to closing, what do you do? You either get the lender to do a short sale or you go into foreclosure. Those are the choices. Yes it sucks, and those are the breaks, but saying that doesn’t solve the problem. Somebody is going to get screwed in this deal, and in the end it will be the taxpayer.

Night Owl on August 2, 2012 at 4:27 PM

So, then, how much more in up front cost will there be for any new loans made with “investor” money once they understand the loan balance just might get a commie Democrat Party discount 5 years into the loan pay back.

Guess it will be called “nut ball goverment up front discount ponts”, may be we can use it as a tax shelter aginst our incomes.!

Realtors can say,, buy a home get a loan and you can use the “nut job goverment up front discount as a tax shelter.”

They be fools in the White House now!

Gonna need a big time White House Clean Up.

APACHEWHOKNOWS on August 2, 2012 at 4:32 PM

I know it’s no secret, but I can tell you for a fact (from working at my day job) that homeowners are ALREADY intentionally defaulting in order to give their mortgage holder invetive to approve short sales and get existing govt aid.

EXACTLY what we conservatives said would be perverse incentives are perversely incentivizing.

And it is making rentals go through the roof here in the major metro St. Louis area, because people (rightly) can’t get home loans because they are a bad credit risk, and some folks with cash are buying up homes marked waaaaaaaay down and renting them at what are probably unfair proces…but whatever the market will bear i suppose.

The problem is that it really is hurting the WORKING poor. The NON-working poor get great HUD housing benefits in nice neighborhoods, in private homes and great apartment complexes, after they get to the thop of the waiting list that is. The areas don’t stay nice, for long, though. For example a really nice apartment complex in St. Charles has all section 8 and the good poepl, the work poor, are looking to move out because it’s like locusts…what was a beautiful complex is beig eaten alive by the, shall we say, less aprpeciative section 8 residnts.

JustTruth101 on August 2, 2012 at 4:32 PM

Night Owl,

It will only be the tax payers due to the current commie nut job Democrats in power.

They are the problem, not the houseing and loan buss..

APACHEWHOKNOWS on August 2, 2012 at 4:34 PM

Finally, a public servant serving the public, and worth his salt.

AshleyTKing on August 2, 2012 at 4:37 PM

I am a good person and here on the internet give free advise to the Democrat Party.

Save all the paper, words and lies.
Chage your party plat form, change your talking points do it in 8 short words.

“WE GIVE TAX MONEY AWAY VOTE FOR US.

APACHEWHOKNOWS on August 2, 2012 at 4:39 PM

I’ve seen this guy testify. He’s just sticking to the book…the one that was written for the conservator of the GSEs. Chapter 1…don’t fritter away the taxpayer’s dime.

that is what freaks out the left…they want free, decent housing for ALL…human right and all that

r keller on August 2, 2012 at 4:40 PM

Funny, I still remember Ed being all giddy over this when McCain proposed it in the 2008 debates.

lorien1973 on August 2, 2012 at 3:53 PM

Srsly?

Mary in LA on August 2, 2012 at 4:41 PM

It will only be the tax payers due to the current commie nut job Democrats in power.

They are the problem, not the houseing and loan buss..

APACHEWHOKNOWS on August 2, 2012 at 4:34 PM

I know. I was a loan officer for twenty five years, before the government had much involvement in mortgage lending. Before computers- LOL!

Night Owl on August 2, 2012 at 4:42 PM

Do they actually know where these notes really are? I’d think that pretending to own a property and then getting “free money” from the Gov’t would be a pretty good scam…they could also launder other money and engage in drug trafficking, but now I’m just being silly./

Dr. ZhivBlago on August 2, 2012 at 4:27 PM

In this case, Fannie and Freddie have the notes. These are all loans the GSEs bought from the banks and mortgage lenders before the crash. Most of them are on homes bought during the peak of the boom when houses got way overpriced. Sucks to be one of those buyers when the bubble burst, and be unable to sell your house.

Ed DeMarco has withstood almost unimaginable political pressure on this. God knows, if the House was still controlled by the Democrats this all would have been done long ago and he would have resigned. I think it’s too close to the election for Obama to get away with firing him.

This was one of the really big “October surprises” I had feared, but it looks like it won’t happen now.

rockmom on August 2, 2012 at 4:43 PM

Oh, and by the way, if Barney Frank and company had had their way, there would not have been an independent FHFA and all of these borrowers would have been bailed out by the GSEs on direct orders from the White House. The only reason the FHFA exists was that Republicans and President Bush insisted on the GSE reforms being included in the first bill that tried to address the foreclosure problems in 2008.

rockmom on August 2, 2012 at 4:47 PM

Finally, a public servant serving the public, and worth his salt.

AshleyTKing on August 2, 2012 at 4:37 PM

If only he can hold on till the end of January without losing his job, like the Inspector Generals who tell the truth.

Night Owl on August 2, 2012 at 4:48 PM

When the commie Democrats give your tax money away, they are in fact stealing your life and giveing it to others.

You work by the hour, month, year.

They give away the % of that which they take in taxes.

Slow death by tax is what they peddle in fact.

APACHEWHOKNOWS on August 2, 2012 at 5:02 PM

The second you drive a new car off the lot, it takes a huge depreciation hit to it’s value. You are instantly underwater on your car, owning more on the loan you just signed than the car is worth.

So, why are we not forcing every car loan lender to forgive principal on every car loan?

gravityman on August 2, 2012 at 5:15 PM

A house being underwater has absolutely NO relationship to ones ability to pay for it. Being upsidedown on a mortage is no reason to forgive a portion of the mortage.

Jabberwock on August 2, 2012 at 3:58 PM

Car loans are indignant!

lorien1973 on August 2, 2012 at 3:59 PM

And, college loans don’t understand the question.

Fallon on August 2, 2012 at 5:27 PM

THIS is what happens when you have GSEs. Can anyone imagine a private mortgage company’s board even having this conversation with the CEO? Didn’t think so.

weaselyone on August 2, 2012 at 3:55 PM

Which is why nearly every mortgage has ended up in Fannie/Freddie’s incapable hands.

Steve Eggleston on August 2, 2012 at 5:47 PM

A house being underwater has absolutely NO relationship to ones ability to pay for it. Being upsidedown on a mortage is no reason to forgive a portion of the mortage.

Jabberwock on August 2, 2012 at 3:58 PM

That’s true unless you are trying to sell it.

Night Owl on August 2, 2012 at 4:01 PM

Or attempting to use it as a rental property moneymaker. OTOH, Bitter Clinger already posted the appropriate response.

Steve Eggleston on August 2, 2012 at 5:50 PM

I pinch pennies to pay my mortgage, which isn’t FHFA, but they want to use my tax money to pay someone else’s? So where’s the fairness on that?

Green Tree on August 2, 2012 at 5:55 PM

The second you drive a new car off the lot, it takes a huge depreciation hit to it’s value. You are instantly underwater on your car, owning more on the loan you just signed than the car is worth.

So, why are we not forcing every car loan lender to forgive principal on every car loan?

gravityman on August 2, 2012 at 5:15 PM

Because the vehicle represents freedom.

Steve Eggleston on August 2, 2012 at 5:55 PM

Full credit to Edward DeMarco. The pressure to give the president what he wants is going to be substantial, but the last thing we need is a new housing crisis.

tom on August 2, 2012 at 6:07 PM

Pacific Heights.

logis on August 2, 2012 at 6:41 PM

When I moved in 06, I could have borrowed twice the money my house actually cost. Why didn’t I do it? It’s not like I would have to pay it back? /sarc

SDN on August 2, 2012 at 6:51 PM

Or attempting to use it as a rental property moneymaker. OTOH, Bitter Clinger already posted the appropriate response.

Steve Eggleston on August 2, 2012 at 5:50 PM

And as I responded to him, that response may make you feel all conservative and stuff, but it does nothing to solve the problem.

Night Owl on August 2, 2012 at 7:25 PM

And as I responded to him, that response may make you feel all conservative and stuff, but it does nothing to solve the problem.

Night Owl on August 2, 2012 at 7:25 PM

Noted. I don’t have a whole lot of sympathy for those who overbought (and yes, this includes family members), or for those financial institutions that overlent.

Steve Eggleston on August 2, 2012 at 8:28 PM

Peggy Joseph comes to mind…

What was most troubling to me about that quote is that I don’t think she came up with that herself… someone else (ACORN?) told her what to expect in return for a vote for Obama…

ITguy on August 2, 2012 at 8:52 PM

Senator Obama, despite his short tenure in the Senate, came in the top 3 of Top Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008 (exceeded only by Chris Dodd and John Kerry, and if you consider that Obama was only campaigning for Federal office 2004-2008, Obama’s per year receipts of Fannie Mae and Freddie Mac Campaign Contributions easily tops the list).

ITguy on August 2, 2012 at 8:53 PM

Noted. I don’t have a whole lot of sympathy for those who overbought (and yes, this includes family members), or for those financial institutions that overlent.

Steve Eggleston on August 2, 2012 at 8:28 PM

I didn’t mean to sound snotty. I think there is plenty of guilt to go around on this. Someone is going to have to figure out some type of unsecured credit vehicle to allow people who have to sell their homes to transfer the excess debt from the property so it can be sold. That’s the only way I can see for the people who aquired the debt to be responsible for it.

Night Owl on August 2, 2012 at 8:56 PM

ITguy on August 2, 2012 at 8:53 PM

Those agencies have all kind of cozy relationships with groups like Acorn, as well as citiy and county housing programs. You wouldn’t believe some of the things they come up with to put people in homes. I imagine Obama’s experience as a community organizer helped him out with this group quite a bit. What I want to know is what the heck are quasi government agencies doing giving money to anyone for political campaigns? That should be illegal.

Night Owl on August 2, 2012 at 9:02 PM

The Republicans tried for years to rein in Fannie & Freddie, while the Demonrats obstructed, said that there were not any “safety and soundness” issues, and falsely accused the Republicans of racism. (shocker!)

Watch Maxine Waters and other Democrats accuse Republicans of racism as the Republicans tried to increase regulation of Fannie Mae & Freddie Mac, and Democrats covered up the corruption.

ITguy on August 2, 2012 at 9:21 PM

Anita MonCrief‏ (Former ACORN employee, turned wistle-blower)
@anitamoncrief

ACORN front group goes after PA

9:25 PM – 2 Aug 12

ITguy on August 2, 2012 at 9:32 PM

A house being underwater has absolutely NO relationship to ones ability to pay for it. Being upsidedown on a mortage is no reason to forgive a portion of the mortage.
Jabberwock on August 2, 2012 at 3:58 PM

Car loans are indignant!

lorien1973 on August 2, 2012 at 3:59 PM

And, college loans don’t understand the question.

Fallon on August 2, 2012 at 5:27 PM

Unsecured debt is very nervous.

Kenosha Kid on August 2, 2012 at 11:18 PM

Kenosha Kid on August 2, 2012 at 11:18 PM

slickwillie2001 on August 2, 2012 at 11:55 PM

So Tax Cheat Geithner is still Treasury Secretary.

Why should anyone take any advice from that guy? He must be the last of Obama’s original appointments left standing, save the creepiest lot of Kevin Jennings (responsible for FistGate and shrugged off homosexual statutory rape of a teenager) and John Holdren (wants to put sterilizers in the water supply to control the population).

BKennedy on August 3, 2012 at 4:46 AM

A housing and mortgage bubble built up — goaded in part, at least, by the government and politicians — and then imploded with consequences that probably surprised many.

Now there is a “bright” idea that someone, who is in a position of responsibility, says will give perverse incentives and [many] people will respond rationally to such incentives not virtuously (as in they won’t take advantage of the incentive).

I think that idea — that not everyone behaves virtuously — shows in many schemes, not just housing or mortgages, put forward that, in effect, rewards people to not act virtuously.

An example would be “free” insurance coverage for young children (not the Obamacare thing) where parents who did purchase coverage for their children were paying hundreds of dollars a month but some had to do without because the parents couldn’t afford the premium. The “free” insurance was to cover the uninsured, but what happened? Many parents who had been paying for coverage dropped it and then went on the “free” program which vastly increased its cost (to government). Given the incentives, does anybody really blame people for taking advantage of something that they can do legally?

Russ808 on August 3, 2012 at 2:23 PM