Hair of the Dog?

WTF is this designed to accomplish, except to give Obama something to crow about in one or two news cycles while doubling down on the same kind of practices that got the housing market and banks into the current mess?  This reminds me so much of the final days of the government in Atlas Shrugged.  Fannie and Freddie are bankrupt?  Well, lets do the same thing to the FHA, just to save our sorry government jobs for a few weeks longer.

The Federal Housing Administration is heading toward a taxpayer bailout, yet the president's latest mortgage modification plan would further increase the agency's exposure to risky mortgages. Mark Calabria calls it a "Backdoor Bank Bailout."The administration's plan would encourage borrowers who owe more than their house is worth to refinance into FHA-insured mortgages. Therefore, the risk of a future foreclosure on these mortgages would fall to the government and taxpayers instead of private lenders.

A recent study from economists at New York University found that the FHA is underestimating its risk exposure. One of the problems is that the FHA isn't properly accounting for the risk to underwater FHA mortgages that have been refinanced into new FHA mortgages. So it's hard to see how the president's plan to refinance private underwater mortgages into FHA mortgages won't further exacerbate the situation.


  1. Fred from Canuckistan:

    United States of Argentina
    Examiner Editorial
    March 31, 2010

    Argentine President Juan Peron frittered away his nation’s prosperity by introducing redistributionist economic and regulatory policies, nationalizing utilities and pumping up the national debt — all leading to three decades of instability and stagnation. (AP Photo, 1951)

    When White House Chief of Staff Rahm Emanuel last year advised "never waste a good crisis," he likely was thinking ahead to President Obama's economic stimulus program and health care plan. After swelling the federal deficit by passing the stimulus at a cost of nearly $1 trillion, Democrats in Congress signed off on Obamacare, with a price tag, according to Rep. Paul Ryan, R-Wis., of $2.3 trillion in its first decade alone. With federal spending exploding at such a rate, it's no wonder that Moody's Investor Service recently warned that it would downgrade the U.S. government's credit rating if it concludes "the government was unable and/or unwilling to quickly reverse the deterioration it has incurred."

  2. epobirs:

    It's really simple. Recall the Cloward-Piven Strategy and everything this administration does becomes clear.

  3. IgotBupkis:



    Anyone else but me keep hearing the Twilight Zone music...?


  4. MattJ:

    Mark Calabria is exactly right. It is a back door bank bailout, just like the push in 2008 for Fannie/Freddie to increase their buying of mortgages and decrease their standards. In fact, basically everything the government has done since Lehman failed is best understood from that perspective. Bush and Obama and their supporters make a lot of sound and fury about being so different, but when push came to shove they both showed that they are vassals to the big banks and their owners.