Opinion Forum

Obama’s Promises vs. Facts

February 25th, 2009

The Associated Press isn’t known for being critical of Barack Obama. So I was surprised to see an AP report today that debunks some of what President Obama stated and promised during his speech on February 24. Here’s a sample:

OBAMA: “We have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and refinance their mortgages. It’s a plan that won’t help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values.”

THE FACTS: If the administration has come up with a way to ensure money only goes to those who got in honest trouble, it hasn’t said so.

Read the whole report. If even the AP has doubts….

Articles written by Tom Carter
Tags: economy, Obama
Categories: Economics, News, Politics | Comments (12) | Home

12 Responses to “Obama’s Promises vs. Facts”

Robert | February 26th, 2009 at 8:01 am

It was a fluke. How’s that saying go, even a broke clock is right twice a day. There you go. The Silent Majority

doris | February 26th, 2009 at 8:17 am

Honest trouble??? If you can’t afford your mortgage, that’s your fault, why all of a sudden is it everyone elses??? If you are stupid enough to buy a house you can’t afford, you should lose it. Yes, I know some have lost jobs, but that is always a possibility, I really don’t want to help them out, but I guess I have to. I miss the good old days when everyone was responsible for their own mistakes.

Kevin | February 26th, 2009 at 1:24 pm

When I read the post I was thinking that “those who got in honest trouble” is the sticking point and Doris’s comment confirms it.

In an unmodified “free market” system everything is buyer beware.

Bought a teething ring for your baby that is covered in lead-based paint? Buyer beware, you should have known better!

Bought a game for your child with parts small enough to be choked on? Buyer beware, you should have known better!

Bought a car that didn’t even make it home before suffering a catastrophic failure? Buyer beware, you should have known better!

Bought a prescription drug that directly caused a serious (or lethal) medical problem? Buyer beware, you should have known better!

We have innumerable laws and regulations designed specifically to protect the buyer because it is a wholly unreasonable proposition to expect a coal miner or a childcare provider or a maintainance mechanic or a motel maid or a grocery store bagger to know as much as a mortgage broker, an automotive engineer, a pharmacist, a nuclear physicist, etc.

And that all ass-u-mes that the seller in each of those scenarios was scrupulously honest. We know that real life simply is not like that in all too many circumstances. As an example, it’s not by pure chance that used car salesmen have such a horrible reputation. N’est pas?

Now, I will readily grant that surely there were individuals gaming the system… treating it as a high-risk investment opportunity and who had some idea of the true risks but ignored them.

The problem is that there is a huge gray area where it’s hard, if not impossible, to determine whether the individual really understood the risks or was even fully capable of really understanding the risks. On top of that, we know for a fact that there were numerous examples of mortgage brokers and refinancers all across the nation who deliberately deceived ignorant buyers.

With all due respect to Doris, I don’t want to live in your cruel, heartless world where the educated get to scam the ignorant and have it sanctioned as justified by the self-righteous.

Kevin | February 26th, 2009 at 8:55 pm

Here’s an indirect answer to the AP reporter’s question.

Oregon Senator Jeff Merkley during a Q&A session this afternoon over at the Blue Oregon blog:

“The Obama team is determined to make sure that their assistance goes to legitimate homeowners and not speculators or investors. They are currently writing detailed criteria to address this and I’m looking forward to seeing it.”

It’s not much, I know. But it does appear that the Administration is sensitive to the problem and is going to address it.

Tom | February 26th, 2009 at 10:38 pm

Kevin, I have no doubt that the President intends to handle this in a fair and responsible manner. I’m not so sure about the goals of others.

This may be one of those things that’s just too hard to do. The President and Congress run the risk of alienating a very large number of taxpayers, perhaps a large majority, if it’s perceived that responsible homeowners are being forced to bail out the irresponsible. That will seriously erode confidence in the whole concept of bailouts and stimulus plans, given the complexity of the process and the staggering amounts of money involved. We already know that most members of Congress didn’t even read the last bill they passed, and that adds to the problem.

Kevin | February 27th, 2009 at 12:14 am

Tom, I think much depends upon how this is framed.

As you know from the post I wrote on my blog a few days ago, I’d rather see the bailout money currently designated as a bailout for lenders go to homeowners instead, who will in turn hand it over to the lenders anyway. But more importantly those homeowners paying their lenders would end up bumping up home values in the process as well as lending some credible value to those damned packaged mortgage instruments at the epicenter of this crisis. All of which would (at least in theory) provide a tangable financial benefit to most homeowners who aren’t in trouble.

And then there is the wider economy and how bailing out financially troubled mortgages would impact it. Even financially secure homeowners are feeling the squeeze that is affecting everyone regardless of their station in life. Would financially secure homeowners be content to see the recession prolonged as long as homeowners they perceive as irresponsible are forced to pay the price for what may or may not fully be their fault?

I’m not a homeowner and thus don’t have any skin directly in the immediate mortgage game. But the larger economy sure as hell has impacted me in a substantially negative way. I’m hurting and the forcast, unless something gives, looks much bleaker for me and my kids. This isn’t just about homeowners who didn’t take any risks. I’m paying a price too. A very heavy price.

Tom | February 27th, 2009 at 12:34 am

Kevin, I agree with you. However, there are critical issues here regarding public perceptions and plain old psychology. Your subtle analysis makes a lot of sense, but it probably wouldn’t cut any ice with a taxpayer who doesn’t take on debt he can’t afford and pays his bills on time, only to perceive that other, less responsible people are being bailed out with his money. If enough people feel that way, it will seriously erode public confidence in the process, which will spread like a virus all the way to Wall Street, where confidence is already seriously lacking.

I don’t have a mortgage now, either, but I’ve also taken a pretty heavy hit from this collapse. And it does concern me that ill-conceived government action could make things worse.

diehlberg | February 27th, 2009 at 2:18 am

hang on, it is going to be a bumpy ride for almost two more years. keep in mind all, yes all, politicians lie. self-serving interests like any other red-blooded american. a debt-driven economy and greedy lenders are the causes of this current mess. the current trend is nationalizing industry and commercial concerns. the next logical step will be to employ well-trained roving gangs to enforce policy. or at least that is how most third-world nations handle it. the machine is running out of oil and too addicted to wean itself and find alternatives.

Carla Axtman | March 1st, 2009 at 12:04 pm

I don’t think its possible for the government to do a proper forensic accounting of every individual who now has a bad mortgage. It would take an immense set of resources and an unreasonable time frame to accomplish such a feat.

There are some taxpayers who are alienated simply because they don’t like Obama, they’ll never like Obama and they’ll never believe in the idea of government assistance for individuals who are in a bad economic spot, no matter the circumstances. Some of these folks happen to be squeaky wheels with a forum..such as Limbaugh (and a couple of alleged finance experts on CNBC and FOX). They’ll receive an undue amount of attention, I suspect.

What the government can do is make a good faith effort to provide assistance to those who were preyed on by those selling these kinds of mortgages. This is not a caveat emptor situation, IMO. Many Americans went in to these mortgages convinced (based on what they were told by lenders and brokers) that this was an entirely appropriate investment that they could manage. Whether its right or not, people rely on the advice and help to navigate the complex paperwork and process for mortgages.

This government assistance effort must also include strong oversight and accountability.

The “its their own fault..” mantra won’t get our country out of this mess. We tried that during the Hoover years and it simply dug us into a deeper hole.

It remains to be seen if Obama can keep this promise. But I think the taxpayers owe it to him to give him a fighting chance.

Tom | March 1st, 2009 at 4:52 pm

Carla, I think you’re absolutely right that the government can’t determine who “deserves” to be rescued from their defaults on mortgages and other debts. In fact, there isn’t even a consensus about which debts government should pay or otherwise mitigate for people.

Where home mortgage defaults are concerned, there are a number of different groups of people involved: those who responsibly took mortgages they could afford, then lost jobs they thought were secure; those who took mortgages they couldn’t really afford, especially ARM, but did so intending to “flip” the house in a rising market to make a profit; and those who took mortgages, including ARM, that they simply could not afford, either because they were irresponsible or couldn’t deal with simple addition and subtraction. There were obviously predatory lenders, too, who simply wanted to sell a mortgage, pass it on, and collect the fees, although all lenders weren’t predatory and they were encouraged (if not pressured) by the government to make subprime loans, especially to minorities.

Once we’ve made the decision to bail out these people, it’s very difficult if not impossible to sort out who deserves to have their debts paid for them, as you said. So, we pretty much have to relieve everyone of the mortgage obligations, to one degree or another.

There are reasonable disagreements on whether this should be done. The real political problem is what I think is a coming backlash among a very large number of people who resent their taxes being used to pay other people’s debts, as they see it, when they themselves have lived within their means and saved a little money along the way. This reaction isn’t limited to just right-wingers and radio/TV talkers; it’s growing in the country among people of all political views. When this resentment reaches a critical mass, it’s going to be difficult if not impossible for the Administration and Congress to continue on this policy track.

And by the way–I don’t have a mortgage, but I have savings in mutual funds. I, too, relied on advice and help from experts, and I’ve been badly hurt. Shouldn’t someone make up my losses for me, or should I have to suck it up and live with the results of my decisions? Just asking.

Carla Axtman | March 2nd, 2009 at 11:16 am

There are reasonable disagreements on whether this should be done. The real political problem is what I think is a coming backlash among a very large number of people who resent their taxes being used to pay other people’s debts, as they see it, when they themselves have lived within their means and saved a little money along the way. This reaction isn’t limited to just right-wingers and radio/TV talkers; it’s growing in the country among people of all political views. When this resentment reaches a critical mass, it’s going to be difficult if not impossible for the Administration and Congress to continue on this policy track.

I think you misread the politics on this, Tom. My sense is that most rank and file taxpayers aren’t angry at the idea of helping people with bad mortgages who are in trouble, in general. I think the backlash will occur with the continued sending of money to banks and other financial institutions–while news reports filter out about big CEO perks and bonuses. Especially given the way that the Bush Treasury handled the initial TARP distribution–no oversight and virtually no restrictions–the public has little patience with bankers and Wall St. folks right now.

I believe that the taxpayer funded assistance for those every day Americans who are in mortgage trouble is vastly less onerous to the citizenry than the banking situation. If anything, the critical mass backlash hammer is going to land squarely on the financial system infrastructure. Nobody that I know likes the idea of bailing out anyone–but most understand that its necessary not because a bunch of Americans took out loans they couldn’t afford. But because a frivilous, greedy and irresponsible financial industry set it up that way.

Tom | March 2nd, 2009 at 1:52 pm

Carla, I agree that people are also angry and getting angrier about the bailouts for banks, big business, and Wall Street, for the reasons you gave. I think the backlash is coming from both directions, and members of Congress will likely begin feeling it pretty soon. Doesn’t help that we’re now in tax season, when the amount of money we’ve given the government, and perhaps still have to give, is right in front of us.