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Another $800 Billion Stimulus?

August 6th, 2010 1 comment

08.06.2010

Another $800 Billion Stimulus?

original article written by Net Advisor

Desperate for Votes
President Obama and democrats in general are under fire for their handling of the economy, a 23% increase in unemployment, and record deficit spending that has done little to stimulate the economic recovery (Additional Polls Source: PollingReport.com).

The democrat’s solution in an election year seems to be, “Get elected, no matter how much it will cost tax payers.”

Another $800 Billion Stimulus?
New discussion now surrounds that President Obama may be pushing Fannie Mae and Freddie Mac to issue up to $800 Billion principle forgiveness (Sources: The Atlantic, also quoting James Pethokouki of Reuters). If this occurs, it would reduce the principle on certain home loans.

The problem with is this newly rumored stimulus is several fold.
1. It only would benefit those who are underwater in their mortgages, including those who bought homes they could not afford. Tax payers would be rewarding those people by allowing them to keep something they could not afford. Those who managed to make payments on their homes, receive no benefit. In fact, everyone else who managed to have some sort of job, will be paying for this stimulus via future taxes. This is just another redistribution of wealth and is not fair to everyone else who is trying to make it on their own.

2. Those “investors” holding the mortgages will be forced to accept a principle loss. The government isn’t interested is investors, unless they are foreign banks. The move here would be to have the government interfere with private legal contracts and force lender’s to re-write them as to where customers can afford them. The question is how can a third party (government) walk in and force a private party (corporation) to change the terms of a contract? What is the legal basis for this? Answer: There is no legal basis for this.

3. Should the government borrow another $800 Billion and bill tax payers for decades to come with another bailout program?

This Washington DC thinking isn’t new. In February 2009 Obama effectively stated that lenders should just take a loan loss on mortgages and readjust payments that fit what people can afford. In fact the President, a Harvard educated lawyer doesn’t agree with contract law. The President said:

The current law “makes no sense” because it’s forcing “a lot of people into foreclosure who potentially would be better off, and the bank would be better off, and the community would be better off if they’re at least making some payments, but they’re not able to make all the payments necessary.”

— Source: UPI, 02-09-2009

We’ll, I would like to live in a $10 million or just a nice beach house and would like to pay, say $1,500 a month. That is what I feel I would like to pay — make it so Mr. Lender. The lender of course would laugh and then ask to leave their office. Using this same Obama-Lawless-Social-Analogy, I think gas prices should be 40 cents a gallon — make it so Mr. President. I also am thinking of buying a new car, but I think the MSRP is way too much, I want whatever car I want and I’ll just pay what I can afford — make it so Mr. President.

So what if the people who built the house lose money and end up getting laid off because the home builder can’t afford to build any more homes. All those jobs are covered by unemployment insurance right? That other tax payer subsidy that pays you not to work for 99 weeks or more (Source: Wall Street Journal).

The problem is that the bank won’t lend money to a builder if the bank is going to be forced to change the terms of the contract at some unknown and arbitrary date in the future that suits the borrowers needs.

Forget about that the banks has shareholders, pension investors, etc, who all take losses on their retirement accounts so someone they don’t know can get a free ride at their expense. Forget about that this move could make getting future loans more difficult, and can increase loan costs.

Forget about the auto manufacture if they lose money, and have to lay off people and close plants. Obama will just bail them out by printing money we don’t have.

Forget about there is no legal basis to make any of this happen.

As much as we would all love to have things, some feel entitled to it. However things costs money, yet if you can get someone to say ‘hey, I’ll give you whatever you need, just vote for me.’ That fails to understand the economic impact of this kind of utopia for all (Socialistic) thinking.

That move places tax payers and the economy at an increased risk for massive defaults, decreases incentives to work, invest, lowers investment capital. We will all live like France with $7.75 gallon gasoline and cars so small they can fit you and maybe a cat in them.

France is technically a Republic form of government similar to the USA, but in practice, like the USA, operates like a socialist government where in France this, take care of everyone manta has produced the 16th highest debt to GDP in the word, and lending rates that are about 80% higher what rates are in the USA (Source: CIA Factbook, 2009 ).

— [Sources: Bloomberg (USA Rates); CIA Factbook, 12.31.2008 (French Rates)]

Further, in France, if you make USD $31,720, you pay 37.38% income taxes. If you make USD $63,648.91 or more a year, you pay a whopping 48.09% income tax. (Data based on EU-USD currency exchange rates for 08.06.2010 [Sources: XE.com (exchange rates); France tax information: FPSi]. And clearly all of these taxes, high gasoline prices and high interest rates produced a county that is on the cutting edge of everything and everyone lives in Utopia. We’ll, not exactly, but that is the model the Obama Administration has been adopting from health care to financial “reform” to cap and trade, to regulation of mileage on autos (cafe standards), to having a Pay Czar, etc.

Existing Law Allows a Way to Deal with Housing & Debt Issues
There are other and existing legal ways to handle the housing defaults. It is called bankruptcy. It can reduce or forgive debt forever. It may not save a home that someone can’t afford to pay, but we are not constitutionally given a right to own property. We have the right to not be deprived (discriminated) from trying to own it.

People can always live in an apartment, condo or another place of what they can afford. Tax payers, investors, or anyone else should not be forced to subsidize every financial decision other people make that go bad. If this comes true, I’ll see you in Vegas.

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Categories: Stimulus