Thursday, September 9, 2010

Bush or Obama: What's your government spending IQ?









1) Bush or Obama? Which president spent a record-breaking $3 trillion in a single year?

Answer: Both. In 2008, Bush was the first president to spend $3 trillion in a single year. According to

White House estimates, Obama will spend $3.6 trillion in 2010 and $3.8 trillion in 2011.



2) Bush or Obama? Which president bailed out hundreds of large banks and corporations.

Answer: Both. Obama carried out Bush’s unpopular $700 billion bailout for failing corporations.

Together, the presidents have bailed out over 600 businesses since Spring 2008.





3) Bush or Obama? This president spent billions of taxpayer dollars on “stimulus” spending

during a recession.


Answer: Both. In 2008, Bush spent over $100 billion on rebates to stimulate consumer spending -

his second attempt at using spending as stimulus. In 2009, Obama enacted a $814 billion

stimulus package.



 4) Bush or Obama? Which President increased spending by many times the rate of inflation across most non-defense categories – such as education, Medicare, Medicaid, income security and

regional development.


Answer: Both. Contrary to popular belief, defense and homeland security spending only made up

about 40 percent of Bush’s new spending. He increased spending across most non-defense categories by four to six times the rate of inflation. In Obama’s first half year in office, many of these budgets rose another 70 percent.





5) Bush or Obama? This president passed an expensive healthcare bill.

Answer: Both. In 2003, George Bush signed into law Medicare Part D, which cost hundreds of billions of dollars. As you probably know, President Obama also enacted an expensive healthcare package earlier this year (though cost estimates vary considerably).

Wednesday, September 8, 2010

Koch vs Soros: The left's double standard

By: Timothy P. Carney

Senior Examiner Columnist

September 1, 2010





Billionaire financier George Soros speaksduring
a forum at Hong Kong University Wednesday,
Feb. 3, 2010, in Hong Kong. (AP File)



I was the main speaker of the night at a fancy dinner. The crowd included millionaire business owners and corporate executives. And the man who introduced me, and who had invited me to speak, was billionaire industrialist Charles Koch.


My topic was what it always is: the evils of corporate welfare and bailouts, and the destructive influence of the Big Business lobby in Washington. In my talk, I blasted "regulatory robber barons" and "subsidy sucklers."


But if you follow the Left's talking points, my talk was part of Koch's "pro-corporate movement."


I report this both as fair disclosure and to make a point: The Koch-created Institute for Humane Studies has, over the past two years, paid me on a few occasions to speak to various audiences (and also to mentor interns). The Koch-funded Heritage Foundation and Cato Institute have also hosted book talks for me.


My message in these Koch-sponsored speeches was the same: Big Business is using big government to steal from taxpayers, consumers and small-businessmen.
But liberal journalist Jane Mayer's 10,000-word piece on the "Kochtopus" (as the web of Koch-funded nonprofits is known) has set the tone for liberals going into the midterm elections. Brothers Charles and David Koch are Exhibit A for the Democrats' claim to be running against Big Business.


Mayer writes that the Kochs' free-market efforts fund a "pro-corporate movement" that "dovetail[s] with the brothers' corporate interest." The Kochs' policy efforts are just "a rationale for corporate self-interest," according to one academic she quotes.


New York Times columnist Frank Rich followed up, attacking the Kochs' "self-interested ... agendas" that "tilt completely toward big business." Tea Partiers are dupes "aiding and abetting [the Kochs'] selfish interests."


But only free-market money men get such scrutiny. Mayer cites the blogs ThinkProgress and ClimateProgress, the Web site Media Matters and the National Committee for Responsive Philanthropy without ever mentioning they are funded by billionaire financier George Soros.


Mayer did write a 2004 article on Soros, but she implies throughout that his political giving is motivated by a desire to make the world a better place rather than out of economic self-interest. Mayer uncritically quotes a Soros spokesman saying "none of his contributions are in the service of his own economic interests." She notes that the campaign-finance regulations Soros backed also empowered the 527 organizations he was funding, but she calls this "an unintended consequence" of "reform."


Rich buys the Soros line, writing: "like many liberals -- selflessly or foolishly, depending on your point of view -- [Soros] supports causes that are unrelated to his business interests and that, if anything, raise his taxes."


Soros invests in every industry and every country. Why should we believe, without evidence, he wouldn't profit from the regulations and subsidies his groups advocate?


On the flip side, it's untrue that more government would necessarily hurt Koch profits. Take oil refining, where Koch Industries is prominent. Tosco refiner Thomas O'Malley said in 2005 that regulations boost his profits: "Why in the world would you fight clean fuels? ... The more stringent you make specifications, those become barriers to entry. ... Strong companies would have an advantage."


Climate legislation is another example. The Kochtopus groups oppose restrictions on greenhouse regulations, which would add to Koch Industries' costs. But many energy giants see profit in such rules and are supporting them, including lobbying king General Electric, Duke Energy, Exelon and oil giant BP.


While Mayer allows that ideology, and not just profit, motivate the Kochs, what escapes folks like Rich is that many of us advocating a free market are trying to make the world a better place -- not just for business, but for the poor. The Kochs have a presentation they use to demonstrate the correlation between economic freedom and human flourishing. The poor in America are wealthier than the middle class in less-free countries. Libertarianism isn't necessarily selfish -- it's often philanthropic.


Koch Industries is no pure virgin when it comes to government: According to USASpending.gov, the company has pocketed more than $84 million in federal contracts.
But if the Kochs were really just greedy billionaires funding front groups to boost their profits, their nonprofits would probably support subsidies and protective regulations. And if the Kochs' movement really is "pro-corporate," somebody made a big mistake in picking me to speak.


Timothy P.Carney, The Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Monday and Thursday, and his stories and blog posts appear on ExaminerPolitics.com.


Read more at the Washington Examiner: 

Tuesday, September 7, 2010

Monica Crowley on why we're mad as hell ...

Transcript of Monica Crowley’s talking points memo (from the Factor) …



 Remember when Howard Beal, the fed-up character from the movie Network yelled this, “ I want you to get up right now, and go to the window, open it and stick your head out and yell, “I’m as mad as hell and I’m not going to take this anymore”?






 That’s how most Americans are feeling these days!



 Why are we mad as hell? Because since the Democrats took the White House and the congress,  each day we have awakened to some new horror.



 We’re mad as hell about a trillion dollars blown on stimulus that did nothing to stimulate the private economy.



 We’re mad as hell about a nearly 10% unemployment rate, almost a trillion and a half annual deficit and a 13 trillion dollar national debt.



 We’re mad as hell about the government take over and destruction of the best healthcare system in the world and it’s 500 billion dollar ten-year price tag.  We’re also mad about the slimy back door dealing and the party line shenanigans they used to ram it through.



 We’re outraged at the Holder justice departments law suit against one of our vary own states, Arizona, for trying to enforce illegal immigration laws.



 We’re furious about Hillary Clinton’s state department sending the ground zero mosque imam  on a tax payer financed junket to the middle east.



 We’re worried about a foreign policy that appeases our enemies, ‘dises’ our friends and is generally an incoherent and dangerous mess.



 We’re angry about monstrous, 2,000 page bills, that nobody has read before inflicting on us.



 We’re incredulous about the cap and trade energy bill which would amount to the largest tax increase in the history of the world.



 We’re ticked-off, that the President rails against special interests but buys off the biggest special interest of all, the unions, with tens of billions of tax payer dollars.



 We’re angry about far-left judges cavalierly dismissing the will of the people.



 We’re mad as hell about an arrogant leadership that refuses to listen to us even as it exponentially expands government in direct violation of what the founding fathers wanted for this country. We do not want American Exceptionalism being turned into ‘unacceptionalisim’.



 And we’re not going to take it anymore!


Today marks the official start of the fall election season. Rasmussen reports has Republicans leading Democrats in a generic ballot contest by a whopping 12 points. Gallup has the GOP lead at an historic 10 points.

Now things could change before November but I think that’s highly unlikely. I don’t know if Republicans will take either (or both) houses of congress but I do know that there will be a major correction.

Like Howard Beal, we’ve had enough. And eight weeks from today, our present leadership will hear our sound and our fury. And that’s the memo.

Friday, August 20, 2010

Death of the 'Mc Mansion': Huge house era is over

On Thursday August 19, 2010, 2:15 pm EDT
 
They've been called McMansions, Starter Castles, Garage Mahals and Faux Chateaus but here's the latest thing you can call them - History.



In the past few years, there have been an increasing number of references made to the "McMansion glut" and the "McMansion backlash," as more towns pass ordinances against garishly large homes, which are generally over 3,000 square feet and built very close together.



What sets a McMansion apart from a regular mansion, according to Wikipedia, are a few characteristics: They're tacky, they lack a definitive style and they have a "displeasingly jumbled appearance."



Well, count 2010 as the year the last nail was hammered into the McCoffin: In its latest report

on home-buying trends, real-estate site Trulia declares: "The McMansion Era Is Over."

Just 9 percent of the people surveyed by Trulia said their ideal home size was over 3,200 square feet. Meanwhile, more than one-third said their ideal size was under 2,000 feet.



"That's something that would've been unbelievable just a few years back," said Pete Flint, CEO and co-founder of Trulia. "Americans are moving away from McMansions."

The comments echoed those made in June by Kermit Baker, the chief economist at the American Institute of Architects.



"We continue to move away from the McMansion chapter of residential design, with more demand for practicality throughout the home," Baker said. "There has been a drop off in the popularity of upscale property enhancements such as formal landscaping, decorative water features, tennis courts, and gazebos."



"McMansions just look and feel out of place today, given the more cautious environment everyone's living in," said Paul Bishop, vice president of research for the National Association of Realtors.



And homebuilders are heeding the call: In a survey of builders last year, nine out of 10 said they planned to build smaller or lower-priced homes.



Even in Texas, the land of go big or go home, they're downsizing.

Diane Cheatham, owner of Urban Edge Developers in Dallas, said today, the average size of home they're building is 2,200 square feet, down from 2,500 in 2005 - which was considered small for Dallas back then.



She said the trend there is more toward building green homes instead of big homes. Right now, they're building a 1,200-square-foot uber-green home for a couple that's downsizing from 3,000-square feet, Cheatham explained.



1,200? Some of the hair in Texas is bigger than that!

"We've never built one that small," Cheatham confessed, but added: "I think that's just a good example of the trend right now."



For a little historical context, 1,200 square feet was the average home size in America in the 1960s. That grew to 1,710 square feet in the 1980s and 2,330 square feet in the 2000s.

What's more, many in the real-estate business say they think this trend of downsizing, or "right-sizing," as Flint likes to call it, is here to stay.



"This is absolutely a long-term effect," he said. "Think of families with small children who've been foreclosed upon ... When these teenagers are in a position to buy a home, they won't want to go through these experiences they saw their parents go through."



Of course, the question becomes, what do we do with all these McMansions that have already been built?



It's tempting to make jokes about what you might do with a former McMansion but with crime on the rise in neighborhoods littered with abandoned McMansions, Christopher Leinberger, in an article for the Atlantic, asked a sobering question: Is this the next slum?



Luckily, people are starting to get creative: A film collective in Seattle has taken over a 10,000-square foot McMansion there, using it for both living and work space. They turned a wine closet into an editing room and tossed a green screen in the garage. And in a suburb of San Diego, one couple turned a former McMansion into a home for autistic adults.



The demise of the McMansion has stirred a growing chorus of murmurs in the real-estate community about the possibility that it may force a dramatic redesign of the suburban McMansion tracts into mini-towns of their own, turning these icons of excess into more practical spaces like offices, banks, grocery stores and movie theaters.



Though, given some of the poor quality of materials and craftsmanship, it begs the question, would it be better to just tear them all down and start from scratch?



Have some thoughts on what to do with former McMansions? Drop a comment in the box below. Or, email ponyblog@cnbc.com.

More from the Pony Blog at ponyblog.cnbc.com





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Speaking Of That

Wednesday, August 18, 2010

The Stunning Decline of Barack Obama

Posted by: Nile Gardiner. Nile is a Washington-based foreign affairs analyst and political commentator. He appears frequently on American and British television and radio, including Fox News Channel, CNN, BBC, Sky News, and NPR.

10 Key reasons that the Obama presidency is in meltdown 

The last few weeks have been a nightmare for President Obama, in a summer of discontent in the United States which has deeply unsettled the ruling liberal elites, so much so that even the Left has begun to turn against the White House. While the anti-establishment Tea Party movement has gained significant ground and is now a rising and powerful political force to be reckoned with, many of the president’s own supporters as well as independents are rapidly losing faith in Barack Obama, with open warfare breaking out between the White House and the left-wing of the Democratic Party. While conservatism in America grows stronger by the day, the forces of liberalism are

growing increasingly weaker and divided.

Against this backdrop, the president’s approval ratings have been sliding dramatically all summer, with the latest Rasmussen Daily Presidential Tracking Poll of US voters dropping to minus 22 points, the lowest point so far for Barack Obama since taking office. While just 24 per cent of American voters strongly approve of the president’s job performance, almost twice that number, 46 per cent, strongly disapprove. According to Rasmussen, 65 per cent of voters believe the United States is going down the wrong track, including 70 per cent of independents.

The RealClearPolitics average of polls now has President Obama at over 50 per cent disapproval, a remarkably high figure for a president just 18 months into his first term. Strikingly, the latest USA Today/Gallup survey has the President on just 41 per cent approval, with 53 per cent disapproving.



There are an array of reasons behind the stunning decline and political fall of President Obama, chief among them fears over the current state of the US economy, with widespread concern over high levels of unemployment, the unstable housing market, and above all the towering budget deficit. Americans are increasingly rejecting President Obama’s big government solutions to America’s economic woes, which many fear will lead to the United States sharing the same fate as Greece.

Growing disillusionment with the Obama administration’s handling of the economy as well as health care and immigration has gone hand in hand with mounting unhappiness with the President’s aloof and imperial style of leadership, and a growing perception that he is out of touch with ordinary Americans, especially at a time of significant economic pain. Barack Obama’s striking absence of natural leadership ability (and blatant lack of experience) has played a big part in undermining his credibility with the US public, with his lacklustre handling of the Gulf oil spill coming under particularly intense fire.

On the national security and foreign policy front, President Obama has not fared any better. His leadership on the war in Afghanistan has been confused and at times lacking in conviction, and seemingly dictated by domestic political priorities rather than military and strategic goals. His overall foreign policy has been an appalling mess, with his flawed strategy of engagement of hostile regimes spectacularly backfiring. And as for the War on Terror, his administration has not even acknowledged it is fighting one.

Can it get any worse for President Obama? Undoubtedly yes. Here are 10 key reasons why the Obama presidency is in serious trouble, and why its prospects are unlikely to improve between now and the November mid-terms.



1. The Obama presidency is out of touch with the American people

In a previous post I noted how the Obama presidency increasingly resembles a modern-day Ancien Régime, extravagant, decaying and out of touch with ordinary Americans. The First Lady’s ill-conceived trip to Spain at a time of widespread economic hardship was symbolic of a White House that barely gives a second thought to public opinion on many issues, and frequently projects a distinctly elitist image. The “let them eat cake” approach didn’t play well over two centuries ago, and it won’t succeed today.



2. Most Americans don’t have confidence in the president’s leadership

This deficit of trust in Obama’s leadership is central to his decline. According to a recent Washington Post/ABC News poll, “nearly six in ten voters say they lack faith in the president to make the right decisions for the country”, and two thirds “say they are disillusioned with or angry about the way the federal government is working.” The poll showed that a staggering 58 per cent of Americans say they do not have confidence in the president’s decision-making, with just 42 per cent saying they do.



3. Obama fails to inspire

In contrast to the soaring rhetoric of his 2004 Convention speech in Boston which succeeded in impressing millions of television viewers at the time, America is no longer inspired by Barack Obama’s flat, monotonous and often dull presidential speeches and statements delivered via teleprompter. From his extraordinarily uninspiring Afghanistan speech at West Point to his flat State of the Union address, President Obama has failed to touch the heart of America. Even Jimmy Carter was more moving.



4. The United States is drowning in debt

The Congressional Budget Office Long-Term Budget Outlook offers a frightening picture of the scale of America’s national debt. Under its alternative fiscal scenario, the CBO projects that US debt could rise to 87 percent of GDP by 2020, 109 percent by 2025, and 185 percent in 2035. While much of Europe, led by Britain and Germany, are aggressively cutting their deficits, the Obama administration is actively growing America’s debt, and has no plan in place to avert a looming Greek-style financial crisis.



5. Obama’s Big Government message is falling flat

The relentless emphasis on bailouts and stimulus spending has done little to spur economic growth or create jobs, but has greatly advanced the power of the federal government in America. This is not an approach that is proving popular with the American public, and even most European governments have long ditched this tax and spend approach to saving their own economies.



6. Obama’s support for socialised health care is a huge political mistake



In an extraordinary act of political Harakiri, President Obama leant his full support to the hugely controversial, unpopular and divisive health care reform bill, with a monstrous price tag of $940 billion, whose repeal is now supported by 55 per cent of likely US voters. As I wrote at the time of its passing, the legislation is “a great leap forward by the United States towards a European-style vision of universal health care, which will only lead to soaring costs, higher taxes, and a surge in red tape for small businesses. This reckless legislation dramatically expands the power of the state over the lives of individuals, and could not be further from the vision of America’s founding fathers.”



7. Obama’s handling of the Gulf oil spill has been weak-kneed and indecisive

While much of the spilled oil in the Gulf has now been thankfully cleared up, the political damage for the White House will be long-lasting. Instead of showing real leadership on the matter by acing decisively and drawing upon offers of international support, the Obama administration settled on a more convenient strategy of relentlessly bashing an Anglo-American company while largely sitting on its hands. Significantly, a poll of Louisiana voters gave George W. Bush higher marks for his handling of the aftermath of Hurricane Katrina, with 62 percent disapproving of Obama’s performance on the Gulf oil spill.



8. US foreign policy is an embarrassing mess under the Obama administration

It is hard to think of a single foreign policy success for the Obama administration, but there have been plenty of missteps which have weakened American global power as well as the standing of the United States. The surrender to Moscow on Third Site missile defence, the failure to aggressively stand up to Iran’s nuclear programme, the decision to side with ousted Marxists in Honduras, the slap in the face for Great Britain over the Falklands, have all contributed to the image of a US administration completely out of its depth in international affairs. The Obama administration’s high risk strategy of appeasing America’s enemies while kicking traditional US allies has only succeeded in weakening the United States while strengthening her adversaries.



9. President Obama is muddled and confused on national security

From the wars in Afghanistan and Iraq to the War on Terror, President Obama’s leadership has often been muddled and confused. On Afghanistan he rightly sent tens of thousands of additional troops to the battlefield. At the same time however he bizarrely announced a timetable for the withdrawal of US forces beginning in July 2011, handing the initiative to the Taliban. On Iraq he has announced an end to combat operations and the withdrawal of all but 50,000 troops despite a recent upsurge in terrorist violence and political instability, and without the Iraqi military and police ready to take over. In addition he has ditched the concept of a War on Terror, replacing it with an Overseas Contingency Operation, hardly the right message to send in the midst of a long-war against Al-Qaeda.



10. Obama doesn’t believe in American greatness

Barack Obama has made it clear that he doesn’t believe in American exceptionalism, and has made apologising for his country into an art form. In a speech to the United Nations last September he stated that “no one nation can or should try to dominate another nation. No world order that elevates one nation or group of people over another will succeed. No balance of power among nations will hold.” It is difficult to see how a US president who holds these views and does not even accept America’s greatness in history can actually lead the world’s only superpower with force and conviction.



There is a distinctly Titanic-like feel to the Obama presidency and it’s not hard to see why. The most left-wing president in modern American history has tried to force a highly interventionist, government-driven agenda that runs counter to the principles of free enterprise, individual freedom, and limited government that have made the United States the greatest power in the world, and the freest nation on earth.

This, combined with weak leadership both at home and abroad against the backdrop of tremendous economic uncertainty in an increasingly dangerous world, has contributed to a spectacular political collapse for a president once thought to be invincible. America at its core remains a deeply conservative nation, which cherishes its traditions and founding principles. President Obama is increasingly out of step with the American people, by advancing policies that undermine the United States as a global power, while undercutting America’s deep-seated love for freedom.



Source: The Telegraph (UK)

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Speaking Of That

Sunday, August 8, 2010

Section 8 Housing Expanding to Upscale Neighborhoods

August 2, 2010  Wall Street Journal




Welcome to Paradise - Dawn Wotapka

The houses in Paradise, a community
in Henderson, Nev., are typical of the
upgraded homes some tenants rent using
a government subsidy.
HENDERSON, Nev.—When Shawnetta Newburn left her drug-infested St. Louis neighborhood in search of a better life for her family in Las Vegas, she didn't expect to live in a house with frills worthy of a McMansion.

But Paradise awaited.

That's the name of the gated community where Ms. Newburn, a single mother who makes $10.50 an hour as a pawn-shop cashier, rents a three-bedroom townhouse with soaring ceilings, a gas-fueled fireplace and an oversize walk-in closet in the largest bedroom. The master bath even includes an enclosed toilet room, a feature popular in mini-mansions. 





"The only time I ever saw that was on TV or something," she says during a tour of the approximately 2,000-square-foot home. "I never thought I'd have anything like this." The development has a kidney-shaped swimming pool.

Her previous apartment in St. Louis resembled public housing, she says, and her three sons were crammed into one bedroom. After her refrigerator caught fire, her landlord replaced it with an outdated brown model. She now has gleaming-white appliances.



Ms. Newburn can thank the housing bust. She participates in a government program for low-income families that subsidizes about half of her $1,400 monthly rent. The program, known as Section 8, has for decades put families in functional but basic homes and apartments, sometimes in less-than-desirable communities.

But overbuilding during the housing boom has left so many homes available that landlords, desperate for renters, are wooing Section 8 recipients, whose government subsidies, delivered electronically, guarantee the landlord gets paid. As a result, Section 8 recipients suddenly have a housing smorgasbord.



Plenty of average housing stock remains in many places, but in certain markets, there are also more upscale selections. On the website GoSection8.com, landlords nationwide tout boom-era showpieces—replete with "great rooms," backyard swimming pools and built-in stainless-steel barbecue grills—that once sold for hundreds of thousands of dollars. Las Vegas has been one of the nation's hardest-hit real-estate markets.



Some renters are getting pickier. "More and more, I'm seeing tenants turn down places," says Arman Davtyan, owner of seven Las Vegas properties rented to Section 8 tenants. Instead, they're going for "another property that's either bigger or in a better area or has more bedrooms," he says. "Before, they tended to take whatever they could get."

Though some neighbors have long contended that government-subsidized tenants increase crime and depress property values, some now say that having a house occupied is better than leaving it vacant, which attracts vandalism and other problems.


In Antioch, Calif., a San Francisco bedroom community where the number of Section 8 listings has skyrocketed in recent years, residents have mixed emotions about the new tenants. "I would concede, I wouldn't be happy with an empty house," says Walter Ruehlig, a longtime resident of Antioch. "It's kind of like, 'What poison do you choose?"'



But resident Natalie Wilson says Section 8 tenants brought big changes to Antioch, including fights, loud parties and litter. She helped launch a neighborhood-watch program. "If a block has five Section 8 homes, are you going to want to move into that neighborhood? No," says the middle-school registrar. "You don't want to live next to a Section 8 house."



Tensions have run high in Antioch. Section 8 tenants complained they were being harassed by police and filed a federal lawsuit in 2008, which is still winding through the courts.



In Paradise, officially known as Paradise Court, relations between neighbors are more peaceful, Ms. Newburn says. Kye Jensen, owner of a townhome behind Ms. Newburn, says a concern is how any renters will affect property values.



Denise McCrae is looking for an apartment near Newport News, Va. Her current apartment in Philadelphia has a red brick dining-room floor and industrial-style windows. She longs for a dishwasher and a washer and dryer.



Several rental listings around Newport News spotted on GoSection8.com have impressed her. One that stands out is a townhouse with a community weight room and a "theater area" with a big-screen TV for residents. Another perk: central air conditioning, which she now lacks. "I was like, 'This can't be Section 8 at all,"' Ms. McCrae says. "This is beautiful."



The change marks one of the most dramatic shifts since the 1974 creation of Section 8, nicknamed after its location in the U.S. Housing and Community Development Act. The $18.1 billion Housing and Urban Development program offers more than 2 million families the chance to live outside of housing projects. Recipients pay a certain percentage of their income, typically no more than 30%, each month.

Landlord participation is voluntary, and the home must pass an inspection. With no official centralized location for available properties, it is impossible to know how many units are available, though the count appears to be rising. When GoSection8.com was launched in 2004, a few hundred listings occurred monthly. Now, 700 or more can come daily, says Richard Cupelli, the site's president. "The amount of new owners that are seeking Section 8 tenants is through the roof."



Mr. Cupelli warns that landlords who buy the cheapest house in the worst neighborhood are no longer guaranteed a tenant. "You better not be buying the garbage," he says.

While some of these new landlords are homeowners who can't sell or those trying to avoid foreclosure, many are investors scooping up bargain-priced units for the rental income.



Last year, Mr. Davtyan, who rents to Section 8 tenants, paid $60,000 in cash for a four-bedroom house in North Las Vegas. He charges rent of $1,436 each month, giving him a profit of about $15,000 per year after insurance and property taxes, he says. He also paid $60,000 for a six-bedroom house in central Las Vegas 18 months ago that once commanded nearly $300,000. It rents for nearly $1,700 a month.



"It's the most lucrative way to go right now," he says. "Nowhere else does your money make that kind of return."






Shawnetta Newburn and her family at home. Landlords are wooing tenants who receive government subsidies.




 Source: Wall Street Journal

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Speaking Of That

Saturday, August 7, 2010

Will Obama pay down mortgages to save Democrats?

The rumors are continuing to grow louder that the Obama administration is planning to announce a massive stimulus via the housing market later this month. Earlier this week, the word was that the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac might subsidize mortgage refinancing at below-market interest rates. But today, a possibility is being talked



about where the GSEs instead (or maybe also) forgive the principal on the underwater mortgages they own or guarantee. James Pethokoukis of Reuters suggests that this could amount to as much as $800 billion. This would be such a huge move that it's hard to wrap your head around it.





First, this could really happen. The Treasury has unlimited discretion to plow as much money as it pleases into Fannie and Freddie. So adding several hundred billion dollars to the $150 billion already provided through their bailout would be as easy as the stroke of a pen. Moreover, the government's other foreclosure efforts, particularly the HAMP program, have had lackluster success. This would provide the principal reductions that many progressives have been calling for to make for more effective modifications -- but even for those who aren't in danger of foreclosure. 


Consequently, it would act as a stimulus. Let's say your mortgage was based on original principal of $250,000. At 6% fixed interest, that would make your payment around $1500. But let's say the housing bubble dropped your property value by 30%, so the home is only worth $175,000. Now, let's say that you had paid off $25,000. That leaves $50,000 in principal that the GSEs could potentially write down. Suddenly, your payment would drop to as low as $1,050. What would you do with that extra $450 per month? The Obama administration would hope that you spend it! 


This would effectively transfer wealth from all taxpayers to middle class homeowners, since it would only benefit those who have mortgages with the GSEs. The upper class generally has either very large ("jumbo) mortgages that don't qualify for Fannie and Freddie's backing or they own their home outright. Poorer Americans, however, don't have mortgages at all -- they rent. So they wouldn't benefit either.


Whether or not this proposal would successfully stimulate the economy depends on the psychology of those lucky homeowners. We have seen recently that saving has been quite high. So it's certainly conceivable that much or most of that mortgage payment reduction would be saved or used to pay down other debt. If the recipients spent it, however, then it would stimulate the economy. 


Moreover, the logistics are even harder to conceive. How will the government decide how much to reduce each mortgage by? Will there be a standardized lump sum across-the-board? Should it be based on original or current mortgage balance? Will the Treasury differentiate between housing markets that have fallen more than others? Will appraisers need to be involved to ensure that renovations weren't completed that raised the value of the home since the mortgage was signed? It won't be possible to make everybody happy here. 


Make no mistake: this is a very controversial idea. Not only would it mostly benefit a specific subset of Americans, but it would also be done in such a way to tiptoe around the usual political process. Of course, considering that it is virtually impossible to pass any more stimulus at this point, this might be the administration's last chance to try to revive the economy before midterm elections. It would be hard to interpret something this drastic as anything other than an act of desperation, however, given all drawbacks of the plan and anger it would create.


Update: Treasury denies that this is being considered, with a spokesperson saying: "The administration is not considering a change in policy in this area." So we'll see what actually happens in the big August conference. 



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