Wall Street Journal – Dukes of Moral Hazard
The Journal’s lead editorial succinctly explains why investors and lenders are uneasy about the big new mortgage plan the president rolled out Wednesday.
Their critique acknowledges that the plan willl help some struggling homeowners. But says President Obama is prolonging the housing downturn, making the eventual rebound harder and not slowing the dec line in hosing prices. The reason – bad borrowers who get government-mandated modifications often still fail after an expensive delay.
“The recent history of mortgage modifications isn’t encouraging. According to the December report by the Comptroller of the Currency and the Office of Thrift Supervision, ‘The number of loans modified in the first quarter that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months. The number of loans modified in the first quarter that were 60 or more days delinquent was 19 percent at three months and nearly 37 percent after six months.’”
Washington Post — U.S. Doubles Fannie, Freddie Backing to $400 Billion
Overlooked in much of the mortgage melee Wednesday was the pumping up of Fannie Mae and Freddie Mac. Taxpayers were already on the line for $200 billion to back up the mortgage companies’ loans. Treasury Secretary Tim Geithner announced Wednesday that that number our double as more and more homeowners defaulted on their mortgages.
Writer Binyamin Applebaum explains how the administration sees the solution to problems caused in part by Fannie and Freddie as growing the companies.
“The Obama plan also increases by $100 billion, to $1.8 trillion, the volume of mortgage loans the two companies can own. The change has the effect of allowing the companies to sell more debt to raise money to buy additional loans. The administration also said that the Treasury would continue to buy securities created by the two companies, easing the pressure to find private investors. Both moves will tend to reduce the cost of financing mortgages, holding down interest rates for customers.”
New York Times — Kansas Governor Seen as Top Choice in Health Post
Writers Peter Baker and Robert Pear give us a peek at the next front in the Obama administration’s war on the economy with the tip that it will be Kathleen Sebelius who picks up where Tom Daschle left off on health care.
It seems that for an administration that’s rolled out more stuff in the past month than a family of rug merchants, the next roll out is just days away.
“With his economic recovery plan signed into law, Mr. Obama plans to turn his attention more to health care next week with a fiscal blueprint that will begin to advance his ideas about covering the uninsured, advisers said. He may also make health care a theme of his prime-time address to a joint session of Congress on Tuesday night, they said.”
Washington Post — Cash for Automakers Going Fast
The demand from GM and Chrysler was pretty shocking – another $22 billion or the $17 billion they’ve already borrowed will be gone for good. But more shocking is how quickly they need the new cash.
Writer Kendra Marr explains how it could be only a few weeks before the companies get the money or go bust.
“Because the companies are burning through cash so quickly, the Obama administration might be forced to decide whether to hand over additional assistance before restructuring plans are finalized, analysts said.”
New York Times — Nafta Looming Over Obama’s Canada Trip
As President Obama heads to Ottawa today, writer Sheryl Gay Stolberg looks at his challenge in satisfying protectionists and free-traders.
It was a tough spot for Obama in the primary and general elections that’s only getting tougher.
“Now that Mr. Obama is in the White House, he is confronting a climate that makes free trade an even tougher sell — mounting job losses, an economy in deep recession and fresh isolationist pressure from the Democratic-led Congress. Members of Congress inserted the “Buy America” language, requiring public works projects to be built with American-made iron and steel, into the stimulus bill Mr. Obama signed in to law in Denver on Tuesday.”
New York Times — Stimulus Tour Takes Obama to New Blue States
President Obama has been using his economic sales pitch to try to lock up traditionally Republican states he bagged in the last election. Though writer Jeff Zeleny devotes a great deal of his story to helping the administration knock down this obvious fact, he still manages to foreshadow what we can expect from the years to come: an endless campaign.
“…the rush of presidential travel over the last week — six campaign-style trips in the last 10 days — suggests that the administration is intent on playing offense from its opening weeks.
A president, of course, has to travel, and because Mr. Obama has pledged to leave Washington every week, he is bound to occasionally turn up in a battleground state. But back-to-back trips to five newly minted Democratic states drew some notice.”
