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Repeating Mistakes?

By: Senator Jim DeMint (Diary)  |  November 16th, 2011 at 12:18 PM  | 

RESIZE: AAA

Sometimes it seems like Congress didn’t learn anything from the housing crisis at all. Early Tuesday morning, leaders in the House and Senate unveiled an appropriations bill, called a “minibus,” to fund several government agencies for the fiscal year 2012. Tucked inside the 401-page bill was language to increase the limits for which the Federal Housing Administration can insure mortgage loans up to $729,750, effectively allowing the agency to back McMansions with taxpayer dollars. Adding further insult to hard-working taxpayers an independent audit revealed, just hours later, that there is a “close to 50%” chance the agency would run out of money and need a taxpayer bailout.

It’s as if Congress is actively trying to collapse the agency by inflating its limits while it’s already going bust. The situation is eerily similar to the Fannie Mae and Freddie Mac bailouts that have cost taxpayers nearly $170 billion to date. Yet, Congress is making the same mistakes by increasing FHA limits and exposing taxpayers to even greater risk, rather than reining the agency in and reforming it.? ?Since 2008 the FHA, which insures mortgage loans unlike Freddie Mac and Fannie Mae which buys those loans from banks, repackages them as securities and sells them to investors, has not had enough assets to cover its losses. Congress requires it to hold a 2% cash reserve rate. Last year it only had .5 % cash holdings and this year, only .24%–prompting calls for a future bailout.

One academic study has pegged the potential cost of that bailout between $50 billion and $100 billion.  Even more worrisome is the fact this bailout could take place without a single vote from Congress. Because FHA gets its financing from the Treasury Department, Secretary Tim Geithner could issue FHA an unlimited bailout all on his own, very much like the quarterly, billion-dollar bailouts that the Treasury Department gives Fannie and Freddie now.

Those who want to increase FHA limits argue that the action is needed to jump start the housing market, but this approach has already failed. In 2008, as part of President Obama’s stimulus package, conforming loan limits for GSE’s and FHA were temporarily, yet significantly, raised in an effort to artificially boost the housing sector and overall economy. ? ?It didn’t work. Foreclosures are higher than ever. The U.S. continues to experience stagnant economic growth, unacceptably high levels of unemployment, and historic levels of debt. There was no major market disruption when the overinflated loan limits expired last month, either.

The only way to restore a healthy housing market is by allowing private capital to replenish it—a goal shared both by the Obama Administration’s “Reforming America’s Housing Finance Market” and the House Republicans’ “Pledge to America.”

In the past, Secretary Geithner has called for “reducing conforming loan limits by allowing the temporary increases enacted in 2008 to expire as scheduled on October 1, 2011.” And that’s exactly what Congress should do.

Congress must learn from its mistakes and refuse to pass this measure. Because, lest anyone forget, the last time Secretary Geithner was presented with the opportunity to grant an unlimited taxpayer bailout, he did.

COMMENTS

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  • Ann_W

    It’s the legislating well that seems to confound them. I really can’t believe they are poised to meddle and destroy, again.

    Thank you for bringing this to our attention.

    • bobguzzardi

      This is news we can use or, at least, need to know.

      The USPS is headed toward bailout.

      Where do Liberals think money comes from?

      • earlgrey

        to count on boehner to oppose this? Is that right?

        Who is worse McConnell or Boehner? I just don’t see Boehner stopping anything. He pitches a fit to give the dem the soundbites they need to defeat repubicans and then he gives the dems what they want.

        • curtmilr

          I sent an email to Speaker Boehner requesting his resignation of the Speaker’s position due to his violating the “Pledge” he made to the citizenry that we would not allow tax increases if elected. He was, and has reneged, therefore he lied, as nothing has changed. They spend and borrow too much! Nothing more!!!

          We need to FLOOD his Inbox with resignation demands, and maybe he’ll realize that we ARE paying attention.! He won’t get any votes from the Dems for reelection for being such a squish!

      • http://pocketchangeproductions.net/ anotherindyfilmguy

        How about defunding the whole program?

      • ihateliberals

        And you wonder why we are so far in debt. What people don’t relaize when they Vote republican is that there are Liberal Republicans tht have the same agenda as the Democrats. Right now Boehner is the leader of the pack. Why do yo think he was so animate about shutting up the Tea Party? We need to elect more Tea Party members but more importantly we need to kick out the RINO’s. A RINO is just another form of liberalism.

      • ihateliberals

        And you wonder why we are so far in debt. What people don’t realize when they Vote republican is that there are Liberal Republicans tht have the same agenda as the Democrats. Right now Boehner is the leader of the pack. Why do yo think he was so animate about shutting up the Tea Party? We need to elect more Tea Party members but more importantly we need to kick out the RINO’s. A RINO is just another form of liberalism.

        We HAVE TO ELECT CONSERVATIVES TO THE CONGRESS IN 2012 NOT RINO’S AND WE NEED A CONSERVATIVE PRESIDENT NOT A RINO ONE LIKE ROMNEY. Boehner has to go as do all of his followers.

  • izoneguy

    Are like crack to congress people…..

    We need to shutter Fannie Mae & Freddie Mac – not make it LARGER.

    Thank You

    Senator DeMint

  • http://www.doctor-bob.biz rsklaroff

    …that PRESIDENTS demonstrate!

    • acat

      in the Senate Majority Leader.

      Just throwin’ that out there.

      Mew

      • Death_of_the_Donkey

        1) Am I the only one who found this statement odd “In 2008, as part of President Obama?s stimulus package, conforming loan limits for GSE?s and FHA were temporarily, yet significantly, raised in an effort to artificially boost the housing sector and overall economy. ”

        2) I find it odd that we are worried about the reserve of FHA potentially running out when we still have no reserve requirements for CDS (even after the panic of 08).

        3) CRA nor Fanne/Freddie caused the housing bubble, and until we admit this we cannot go after the real culprits and change rules so that it doesn’t happen again (ie ratings agencies, securitizations, non-bank lenders, FSMA, and CFMA).

        For the record, I am also against raising the conforming loan limits because regardless of where you live, I am not sure that government should be helping anyone buy a half-million dollar house.

      • YnotNOW

        DeMint has that in spades. McConnell less so.

      • runner12

        Thank you Sen. Demint for always speaking the truth and standing up fir what is right.

        Senate Majority Leader DeMint has a very nice ring to it.

        • runner12

          That would be “for.” Darn Ipad.

    • harlan

      …to do that which is in the best interest of this country and her people.

      (See Peter Schweizer…Throw Them ALL Out.)

      The Jim DeMints are too few and far between.

  • carolynr

    Let’s take the dead sea…you have to have inflow and outflow for the Sea to be clear. THERE ARE NO JOBS. What candidate has a PRIVATE SECTOR JOBS PLAN….I.E., INFLOW…PERRY.

    I don’t know that much about Vegas…but FL…yes. Florida does not have a state income tax. Also…Florida does not have horrific winters…hurricanes…yes…winters…no. I have an excellent idea about generating energy in that state…but that is not the topic.

    People from the north generally want to go to warmer climates because they can’t take the cold. So, usually younger people buy their houses….BUT WE DON’T HAVE JOBS. Two reasons…one is bloated union salaries (both private and public) and we don’t have something going for us. What do I mean. OK…for some of these kids coming out of high school…how about a trade school. Remember how much it costs to get your car fixed? Everyone drives a car. How about appliance people…do you know…the last one left where I live…AND WE ALL HAVE APPLIANCES. Everyone needs a hair cut…there’s an idea. So for those without a grade point average to get into college…trade schools.

    Santorum keeps talking about manufacturing….we’ve gone past that in the industrial revolution. Yes…high tech stuff with the brains coming out of college…we can do it. Service industry…why not here instead of India? You see the point I am trying to make…Everyone can’t be a CEO. We need people to risk their lives and fortunes and start businesses…like a mechanic shop. No…no…our precious little OWS people don’t want to get their hands dirty…they want us to give them money.

    Anyway…Senator DeMint….if we did open us energy development…we would create jobs and that would have a ripple effect. Everyone of those workers needs to have lunch and that takes care of the waiters/waitress/cook, etc. They in turn take care of the baby sitters…and on it goes. Once people have jobs and we encourage SAVING…they can buy up this inventory. It all starts with the INFLOW….i.e. JOBS. We can’t do this on the government dime…we have to do this through the private sector…and that means…get them out of my business and let me go. WHO SAYS THAT BETTER THAN PERRY? ANSWER…NOBODY.

  • redmymind

    Keep up the good work!

  • http://pocketchangeproductions.net/ anotherindyfilmguy

    I have a feeling that money was thrown at key people by lobbyists to get the ball rolling. How about making it illegal to use tax dollars to lobby for more tax dollars? Likely it would take the point of a bayonet to get something like that done so how about just pillorying the thing in the press until it dies quietly? OK… likely that won’t work either… in that case how about forming a coalition of people who feel like they’ve been taxed enough already and have them vote out people who introduce and vote for stuff like that? It just might work…

  • gawken

    such as NY, Mass, CT, Cal…so this increase in the mortgage limit is a pay-off to blue states..

  • 4bar40

    Here is the problem

    “Tucked inside the 401-page bill was language to increase the limits for which the Federal Housing Administration can insure mortgage loans up to $729,750, effectively allowing the agency to back McMansions with taxpayer dollars. ”

    Who “Tucked” it in there?

    Because accountability for actions is the only way this stuff gets stopped. The person should have to stand in front of the public square and explain why this was so important to include and why he heartily believes his constituents should be on the hook for it. The only way the legislation gets honest is to tie the congressperson’s name to it…line by line, item by item.

    And if it is known who put it in, by either record of committee meeting or what ever means, why not find out and announce with this post? There should be a trail or public record for everything inserted or “tucked” into a bill. And members of congress should be accountable directly for what they do as our employees.

    Just like in business there is document control to track changes, additions, amendments, and exclusions. Along with that, (at least where I work) there are update notes which indicate what changed, who changed it, when it changed, and why. Surely one of the Congressional staff scribes could accomplish this.

    If there is no document control, how in the heck do you actually know what you are voting on?

    So please, Senator Demint, lets take it that extra step. If you believe in reform, if you believe in ending the stupidity in congress (and I do think You do) then carry it onward to the final step.
    Tell us who…or sponsor legislation that will tell us who in the future.

    The only way we fix this is through direct accountability to the words in the bills. Once forced to defend stupidity, usually the stupidity stops.

    just my 2 cents,
    of course I could be wrong.

  • goformitt

    You have to look at home prices relative to income. Income is higher in blue states too.

    But anyway -

    Senator DeMint makes the same mistake I was just tying to explain in the comments section of a previous post about the stimulus.

    Senator DeMint says the housing stimulus didn’t work because, “Foreclosures are higher than ever. The U.S. continues to experience stagnant economic growth, unacceptably high levels of unemployment, …”

    But again – just because all these things are true does not mean we can truthfully state “The stimulus didn’t work”

    I mean, it’s not rocket surgery to say things may have been much worse without these stimuli. And I’m not even saying that is so, just that it is as verifiable as stating “The stimulus didn’t work”.

    Trying to keep a fire going under the anemic housing market by increasing the mortgage limit insured doesn’t seem like such a disaster to me. It would become a problem if housing prices were to plummet again – increasing the likelihood of large scale defaults. But I think housing has come close to a bottom, so I don’t think we’ll see that.

  • westcoastpatriette

    Keeping the light glaring on all the sneakiness tends to cause cockroaches to run and hide. We need constant accountability for every move they make. It would definitely lessen the theft of the peoples’ money if every thief was called out by name every time they attempt to rip us off one more time.

  • bobguzzardi

    good point. There must be a way to track the culprit. Some FHA lobbyist, probably.

  • edintexas

    While I doubt the MSM would bother to publish the information, (they don’t now and they have the ability to find out) it would be worthwhile for opposition research the next time the Congresscritter runs for election (in this case a Senator, possibly Dingy Harry figuring those voters not coerced by the unions will forget all about it by the time his next election comes around in 5 more years). Sadly, the politicians are more often right than wrong about the public forgetting their past political sins.

  • anjinconsulting

    doesnt seem rational. As I understand it, mortgage insurance is predicated on an appraisal of value. It is reasobnable to asume that the housing market is “anemic” because housing/property is a) overvalued, and b) there aren’t enough qualified buyers (or even unqualified buyers) with enough pocket change to put down the cash to buy an overvalued house.

    How is raising the maximum dollar value for an overpriced commodity to protect bad lending practices sound business?

  • bobguzzardi

    good point. How does raising the limit address the plummeting prices or defaults?

  • acat

    hedge Fannie and Freddie against the inevitable inflation on the horizon.

    Today’s McMansion may be 750k but depending on how high the rate of inflation actually is*, and how high it gets before it’s back under control, that may end up covering little more than a suburban townhouse in an average neighborhood….

    Mew

    * This cat doesn’t trust the cooked government numbers on inflation any more than he trusts them on unemployment… I trust my own eyes at the grocery store. I find the McDonald’s Big Mac value meal is an excellent dollar-value metric…

  • goformitt

    The move encourages banks to lend as it reduces risk. It recognizes the fact that banks risk aversion has hampered recovery.

  • paladin1

    anything regarding the stimulus working over the long run. The influx of stimulus money merely prolonged the inevitable complete collapse of the housing market. It has only sunk us as taxpayers in deeper, and placed the individual wealth of the taxpaying citizens in deeper jeopardy by the huge deficit build-up, causing them to have less money available to keep up with their previously affordable home mortgages. Prolonging the collapse will only last until the government cannot borrow and print any more money without causing the bankruptcy of the entire country, if we are not there already.

    The fact of the matter is that Fannie and Freddie’s indiscriminate lending to those it KNEW could not likely pay back the loans, only subsidized single family housing at the taxpayer’s expense. Properly functioning banks do not lend to those who do not have the financial wherewithal to repay. It is a Democrat boondoggle which far too many Republicans bought into and has now placed us near national ruin (along with the SS and entitlement mentality that this is an extension of).

    It is disingenuous to say we are better off now that we would have been because when it ultimately collapses, we will be far worse off thn had we allowed the pain to occur in the first place.

    As the Senator expresses so well, we continue to listen to the drivel of the left at the peril of the entire economy and hence, the nation.

  • dajeeps

    But there are a few problems with the concept, like an implicit inflation-targeting Fed that counteracts the effects by setting a low ceiling on NGDP, and the inherent inefficiencies that go along with government spending, even if the Fed would allow more nominal income. In addition, the IOR program means that there won’t be any real recovery until the net yield on treasuries is higher than the interest being paid on reserves because it exacerbates the liquidity trap effect, or the IOR program goes away. According to trend nominal income, the stimulus indeed did not work and could not given the aforementioned realities along with some others that have more to do with the effect of the euro crisis on the dollar.

    Though, these aren’t the only problems that sabotaged any hope of the stimulus package working as intended. If we were to suppose that all else stayed the same and the government decided to try to spend our way out of the recession, it could have had some positive benefit. But that isn’t what happened. Instead, government went on regulatory and gangster government bonanza, perhaps with the notion that we could regulate our way out of it as well, with a dash of thuggery. In that case, with the introduction of new supply side issues, the boost in demand would have had to be extraordinarily large to fill in not only the $3T plus gap left by the financial crisis, but also to make up for the supply side problems, which there were already plenty of existing ones with prior to the unleashing of the bureaucrats.

    But you know, Obama had “top economists” working out all the details for him. I am sure he knew full well that his package was inconsequential. And we know that much of the $800B was a slush fund that went to core constituencies, leaving us to ask, Mr. President, where are the jobs?

  • goformitt

    Did you read the CBO report? It sounded to me that they were saying these sorts of stimuli do provide a return on investment. Do I have that wrong? If I am correct, then your analysis this problem is wrong.

    I know it is popular for the Tea Party Right to point fingers at some “undeserving” other class, but have you ever looked at the alarming disparity in wealth emerging in this country?

    Even if you don’t much care for Rolling Stone, take a minute to read a couple lines from this month’s article: “How the GOP Became the Party of the Rich”

    “The nation is still recovering from a crushing recession that sent unemployment hovering above nine percent for two straight years. The president, mindful of soaring deficits, is pushing bold action to shore up the nation’s balance sheet. Cloaking himself in the language of class warfare, he calls on a hostile Congress to end wasteful tax breaks for the rich. “We’re going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share,” he thunders to a crowd in Georgia. Such tax loopholes, he adds, “sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10 percent of his salary ? and that’s crazy.”

    Preacherlike, the president draws the crowd into a call-and-response. “Do you think the millionaire ought to pay more in taxes than the bus driver,” he demands, “or less?”

    The crowd, sounding every bit like the protesters from Occupy Wall Street, roars back: “MORE!”

    The year was 1985. The president was Ronald Wilson Reagan.”

    I paste this here only to demonstrate how far the thinking has changed in the past 20 years. And I believe this “radicalization” of our party has hurt our party. Look at the national polls – in general the GOP is not highly regarded.

    In my opinion, we have lost our way.

    A couple more quotes from the article:

    “”The Republican Party has totally abdicated its job in our democracy, which is to act as the guardian of fiscal discipline and responsibility,” says David Stockman, who served as budget director under Reagan. “They’re on an anti-tax jihad ? one that benefits the prosperous classes.”

    and

    The GOP campaign to aid the wealthy has left America unable to raise the money needed to pay its bills. “The Republican Party went on a tax-cutting rampage and a spending spree,” says Rhode Island governor and former GOP senator Lincoln Chafee, pointing to two deficit-financed wars and an unpaid-for prescription-drug entitlement. “It tanked the economy.” Tax receipts as a percent of the total economy have fallen to levels not seen since before the Korean War ? nearly 20 percent below the historical average. “Taxes are ridiculously low!” says Bruce Bartlett, an architect of Reagan’s 1981 tax cut. “And yet the mantra of the Republican Party is ‘Tax cuts raise growth.’ So ? where’s the fu***** growth?”

    Take a look at the chart in the article. You may not agree with everything written – I know I don’t – but it is important to understand this perspective:

    Read more: http://www.rollingstone.com/politics/news/how-the-gop-became-the-party-of-the-rich-20111109#ixzz1dtubynAp

    Read more: http://www.rollingstone.com/politics/news/how-the-gop-became-the-party-of-the-rich-20111109#ixzz1dtuM4MeR

  • kipling

    The Republican party and the establishment republicans in Washington are not our friends and they are not our leaders. Like the Democratic who they model themselves after, they are a pariah that prey upon the public in the form of taxes. They need to be defeated and run out of town.

    They are not repeating a mistake. They are deliberately selling the conservatives out and have no intention of correcting the mess in Washington.

  • MF

    Anyone citing RollingStone.com as a reference has just cast major doubt on his or her credibility. That site / rag mag is basically another MoveOn.org or HuffPo.

    The continual class warfare stuff has long since grown old. “The GOP is the party of the rich” has been debunked so many times it’s not funny. To paraphrase the Soup Nazi from my favorite Seinfeld episode, “Why are you wasting our time?”

  • http://jeffemanuel.net Jeff Emanuel

    liberals love Mitt. You’re a great ambassador.

  • paladin1

    here is a quote from the chairman of the CBO from a Congressional hearing yesterday:

    ELMENDORF: What we said was, [the stimulus bill] would be a big boost in the level of GDP in the first 3 or 4 years,*** and then, relative to what would have happened to GDP without that law? the level of GDP would be a little lower at the end. That is, a net negative effect on the growth of GDP over 10 years.

    SESSIONS: And in the next 10 years, since you?re carrying that debt and paying interest on it and the stimulus value is long since gone, it would be a continual negative of some effect?

    ELMENDORF: Yes, it would represent a drag on the level of GDP beyond that, if no other actions were taken.

    Needless to say, Elmendorf?s assessment would also apply to the president?s most recent jobs stimulus package, which would spend $450 billion over the next year, making it larger ? in annual terms ? than the first stimulus package, which spent $800 billion over two years.

    I cut this directly from National Review Online and if you go there, it has video. So, you are mistaken and you do have it wrong. Throwing more good money after bad is a bad idea in real life and it is a bad idea in the ivory towers of Congress.

    We have to face the pain sometime and it will be less painful now that in 3-4 years, when the stimulus effect is gone. I make no class arguments as you infer. The fact of life is that everyone cannot live in a house. Just because the liberal bleeding hearts in the Democratic Party and the timid in the Republican Party think so, does not make it feasible or right to redistribute from earners and give to the others. Charity is a Christian trait, not a government dictate.

  • Bill S

    I’d rather read Daily Kos than that piece of cr*p rag. Any publication that employs Matt Taibbi isn’t worth wiping your butt with.

  • YnotNOW

    And there are some serious infections in Congress. Exposing them is the first step. Replacing the “infected” members is the second. Holding their feet to the fire is the Third.

    Thank you, Sen DeMint, for doing your part. Wish I could say the same for my CO senators!

  • revivefederalism

    Governments have been known to manipulate the Big Mac index as well!!

    http://marginalrevolution.com/marginalrevolution/2011/11/sentences-to-ponder-32.html

  • Menlo

    I’ll be happy to give them several minibuses to drive them out of Washington. I’m sure they could buy several brand new minibuses for a lot less money.

    As for the stimulus, it was not a total loss. It actually did help stimulate quite a few TSA workers with all that money for RapeScam to make x-rated x-ray machines. I hear many of them now sit idle though, as agents are no longer content to just watch.

  • lizzie

    from what is really prolonging the housing market misery.

    Real estate is always Location, location, location. Overbuilding in Las Vegas and Florida should NOT be treated the same as those of us in normal RE markets who can NOT refi at a lower rate or get buyers who qualify for mortgages, all due to new regulations in 2010.

    I have the cheapest apt in the Bronx on sale for two+ years, and now am offering Seller Financing (I have no mortgage on it) .because no one can qualify for an $75,000 mortgage or $375/month for a 30yr fixed in a neighborhood where rent is $1,000 per month, and very stable employment due to major medical center and good schools (walk to Bronx HS Science!)
    ..
    No error: no one can qualify for $75,000 mortgage or $375/month for a 30yr fixed for a 750 sq ft apt that would sell for $700,000 anywhere in Manhattan.

    With all due respect, Senator DeMint wastes his time on this point.

  • acat

    I do not see where the Big Mac index in the U.S. has been adulterated.

    I do note, however, how fast the “research project” that was indexing a couple thousand different items on Amazon got pulled down….

    That proves, to this cat, that the government numbers are quite cooked.

    Mew

  • davesinsanantonio

    If Congress had not pushed banks to make high risk loans for purchasing overpriced houses by people who could not afford them in the first place!!!!!

    So, throwing more money into that mix to “encourage banks to lend” is not only foolish, it is criminally insane!!!!!

  • davesinsanantonio

    If Congress had not pushed the banks to make high risk loans on overpriced houses to people who could not afford to buy them in the first place!!!!

    Throwing more money into that mess to “encourage banks to lend” is criminally insane!!!!!

  • daniel22

    Congress every chance he gets to announce yet another vote buying scheme. Of course he uses our tax dollars and our credit card to do this with but so what. So what if we are broke? The point is he needs to buy votes to get re-elected.
    The same with this minibus bill. Congressional representatives need re-elected hence this bill. Who would vote for the person that prevented them from owning a house or did not prevent them from losing a house? It makes great campaign fodder to use against your foe in an election year.

  • annie54

    reassurance that we have one whom we can trust, Senator DeMint.

  • edintexas

    Citing the CBO is a path fraught with danger, or naivety, The CBO is required to “score” (who ever came up with that disingenuous term?) a bill solely on the basis of the content of the bill.

    As an example, when Obamacare was being reviewed by the CBO, they had to accept the stated half trillion USD cut from Medicare as an actual savings which could count toward paying for Obamacare. Everyone in the world knew that there would never be a cut of half trillion USD from Medicare physician reimbursement, but CBO had to accept it as real. And that is as real as CBO “scoring” gets.

    Perhaps they use the term “score” to differentiate the process from any semblance of accounting procedures. It is, after all, a game.