Thursday, October 09, 2008

McCain’s Mortgage Plan

Last night, McCain dropped what I am sure he believed to be a bombshell of a policy to deal with the housing crisis in America. He said:
“…if we go out and buy up these bad loans, so that people can have a new mortgage at the new value of their home -- I think if we get rid of the cronyism and special interest influence in Washington so we can act more effectively.

As president of the United States, Alan, I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes -- at the diminished value of those homes and let people be able to make those -- be able to make those payments and stay in their homes.

Is it expensive? Yes. But we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy. And we've got to give some trust and confidence back to America.”
I was actually a bit shocked when I heard this, and I couldn’t believe it. Did McCain just say that we will collectively buy up bad mortgages, and was this on top of the Wall Street bailout? Conservative firebrand Michelle Malkin sure hates the idea. She writes:
“The McCain campaign immediately sent out this fact sheet on the proposal, which will cost at least $300 billion. The proposal involves directing the Treasury Secretary to “purchase mortgages directly from homeowners and mortgage servicers.”

He spent the entire debate assailing massive government spending — while his featured proposal of the night was to heap on more massive government spending to pursue home ownership/retention at all costs. If Obama had proposed this, the Right would be screaming bloody murder about this socialist grab to have the Treasury Department renegotiate individual home loans and become chief principal write-down agents for the nation.”
She is right on that point about Obama; if he would have offered this up as part of his economic plan, the Right would have been hitting him hard. However, there is already a plan to have banks renegotiate the price of their loans with homeowners. The plan says:
“A new federal loan workout program called Hope for Homeowners (HfH) begins this month, targeting those unable to pay their mortgages. It is for homeowners who bought their homes before 2008 and now have monthly payments exceeding 31% of their income.

Under the program, banks would in many cases write down mortgages to 90% of a home's current value. Such a provision would be important in California, where many recent home buyers have mortgages that now greatly exceed their property values.

The new 30-year fixed-rate loan would be insured by the Federal Housing Administration and could not exceed $550,440.”
More importantly, McCain’s plan isn’t money on top of the approved bailout, but money diverted from it. The SCSU Scholars explain:
“It would be a redirection of the money, not a new cost. That was certainly not clear last night (not that much of this plan really was before I sat and read the email that had the plan I'm quoting here.) The McCain resurgence plan would be available to mortgage holders that:

1. Live in the home (primary residence only).
2. Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment).”
I don’t know if this is a good idea, but I do have a problem having tax dollars go to buying adjustable rate mortgages that people should have never bought to begin with. Crooked bankers and greedy CEOs have their share of blame in this mess, as does the federal government and elected officials, but the truth is this crisis exists because we have lived outside our means for the last 20 years in the United States. Being able to borrow huge amounts of money on the hope that we would one day be making exceptionally more money, or that our property would increase exponentially forever is what caused our current troubles.

My parents live in a modest community, and before the housing bubble popped, people were paying up to $400,000 for homes where the average household income is $35,000 a year. My father rightfully concluded that no one in his neighborhood could actually afford these mortgage payments, even if they had fixed rate mortgages, and even if their wages increased reasonably each year. For people to have taken loans on homes they couldn’t afford to begin with, and then expect to be able to pay that same mortgage as it increases each ensuing year, was a form of collective madness that we are now paying for in America. Bankers were getting rich off these loans (at least on paper), and we all wanted to believe we would buy a home and sell it within a few years after it had tripled in value. We as a country, from the working class to the ruling class, wanted to believe the lie, so none of the warnings over the last few years made an impact.

Having said that, Bob gives me the heads up to a Michael Walzer piece in Dissent, which I think accurately sums up why people were allowed to take loans that they shouldn’t have. He writes:
“The truth is that the invisible hand doesn’t always work, and so it requires some help from a visible hand—and that is the hand of the state. There is no other agency capable of protecting us from ruthless or reckless gain-seekers, for capitalist institutions too often reward both ruthlessness and recklessness. State regulation is, therefore, a necessary feature of—even if it is also a social-democratic addition to—the capitalist system. When regulation fails, we are all in trouble. Deregulation is the major cause of the current crisis.”

Wednesday, October 08, 2008

Why the “Obama Doctrine” Stinks


Last night’s debate was a rather worthless affair. McCain made some strong points near the end on issues of foreign policy, but his bumbling and rambling during the economic portion was difficult to watch. It doesn’t help that some of McCain’s economic policies are appalling, and I plan to write about McCain’s terrible mortgage plan later today, but for now, let’s talk about the “Obama Doctrine.”

I thought Obama preformed adequately at the debate last night; he sounded able and confident, and even looked presidential walking around the stage. Unfortunately, these recent debates have not forced Obama to deal with the conflict inherent in his foreign policy vision: when and where the U.S. should intervene militarily. McCain never pressed him as to what specifically Obama’s interventionism is going to look like, or why it would produce radically different results than interventions over the last 10 years.

Christopher Hitchens recently wrote a piece on why Obama was right about Pakistan, and he correctly identified that,
“Sen. Barack Obama has, if anything, been the more militant of the two presidential candidates in stressing the danger here and the need to act without too much sentiment about our so-called Islamabad ally. He began using this rhetoric when it was much simpler to counterpose the "good" war in Afghanistan with the "bad" one in Iraq. Never mind that now; he is committed in advance to a serious projection of American power into the heartland of our deadliest enemy. And that, I think, is another reason why so many people are reluctant to employ truthful descriptions for the emerging Afghan-Pakistan confrontation: American liberals can't quite face the fact that if their man does win in November, and if he has meant a single serious word he's ever said, it means more war, and more bitter and protracted war at that—not less.”
We may agree that the U.S. needs to enter Pakistan if an opportunity to hit Al-Qaeda presents itself, but entering their territory without their government’s permission may force those unhappy with the newly elected Pakistani government to create unrest and even move to overthrow the regime. Let’s not forget that the U.S. is deeply unpopular in Pakistan, and the fact that a simple military action into Pakistan can spin the political situation in the country out of control is something Obama isn’t adequately addressing. We may end up with a situation in Pakistan (and Afghanistan) far worse than what we have seen in Iraq.

That isn’t to say that Obama’s policy is wrong; I believe that the US will likely do (and should do) what it needs when dealing with terrorist groups undermining the Afghan and Pakistani governments. I would like to ask all Obama supporters, if a war in Pakistan becomes as costly as the one in Iraq, will they still believe it is the “good” war?

It is not just the unwillingness of Obama supporters to address this fact that makes me uneasy about an Obama presidency; His murky stance on the use force to stop genocide is just as feeble. Obama may argue that the United States must intervene to stop crimes against humanity from occurring, yet he is both unwilling to admit that our actions in Iraq were rooted in that very logic, and also fails to recognize that intervention means a long term commitment that may have unintended consequences. Even small peace keeping missions can turn into assignments where our military is forced to do more than bring a physical presence. Both the United Nations Operation in Somalia and the American military intervention there failed to bring peace or stability, for reasons completely within the world’s control. The WSJ writes:
“The U.S. military, with 18 dead, wanted nothing more than to finish what it had started [in Somalia]. Mr. Clinton instead aborted the mission. The U.S. released the criminals it had captured that same day at such great cost, and the U.N., lacking U.S. support, was powerless to keep order. Somalia remains a lawless, impoverished nation. Worse, the terrorists of al Qaeda interpreted the U.S. retreat from Somalia as a sign of American weakness that may have convinced them we could be induced to retreat from the Middle East if they took their attacks to the U.S. homeland.”
This should be a lesson etched into Barack Obama’s mind, and why his Iraq policy has been, and continues to be wrong. Obama, when it suits him, claims that the U.S. cannot use its military to solve humanitarian problems, and argues that even if the removal of our troops in Iraq led to genocide, he would not change his position. Yet, as David Weigel Points out for Reason magazine:
“[Obama] has called for, or retroactively endorsed, interventions in Zimbabwe, Pakistan, and Sudan. He has advocated a humanitarian-based foreign policy for his entire public career. Since coming to the U.S. Senate in 2005, he has built up a brain trust of academics and ex-Clintonites who, like him, challenge the logic of the Iraq war but not the logic of wars like Iraq.”
I am in favor of interventionism, and so while I tend to agree that the U.S. should involve itself in the conflicts pushed for by Obama, it is maddening to see him and other Democrats condemn the mission in Iraq, even when they were once some of the strongest supporters of liberating the nation from Saddam’s control. Obama is basically arguing that he is in favor of interventionism, as long as it doesn’t require much of a commitment from the United States. Or worse, that he is for interventionism as long as it wasn’t started by a Republican administration. Obama wants it both ways; he wants to take the moral high road when it comes to past crimes against humanity and why the U.S. should have involved itself, and yet asserts that our current missions to do such things are wrong and unimportant.

It seems like Obama can’t even keep these diverging tangents in his policy from getting the best of him. He mentioned in the recent town hall debate that,
If we could've stopped Rwanda, surely, if we had the ability, that would be something that we would have to strongly consider and act.”
How can be possible mutter these words, and at the same time concede that he would have pulled out of Iraq knowing that his policy would bring about that very occurrence? Perhaps Obama is only committed to past tragedies that don’t require him to take decisive action.

If this is the future of the United States under the “Obama Doctrine”, then I have serious misgivings about the use of American power and influence under his presidency.

Sunday, October 05, 2008

Obama’s Vision for Europe


Obama’s senior foreign policy advisor, Gregory B. Craig had some interesting things to say to the EU Observer last week, specifically on Obama’s commitment to the expansion of NATO into Eastern Europe. He said:
“The US and Europe will have to co-operate with Russia in areas where they have "common objectives and common ground," especially on non-proliferation - reduction of the global nuclear arsenal, security of nuclear materials and challenges such as North Korea and Iran - senator Obama's foreign policy man explained.

"[But] that doesn't mean that you trade away our security commitments to the new members of NATO, that's not even thinkable. I always remember the notion that the expansion of NATO was not a threat to Russia, that this was a decision not by NATO to move east, but a decision by the new democracies from the former Soviet space to integrate with the West."

"The notion that you choose to co-operate with Russia vis-a-vis Iran at the expense of central and eastern Europe, I just don't accept that. That's not viable and it won't happen that way," Mr Craig said.
He also stated that Obama’s presidency would support the missile defense system in Poland, which is comforting to hear.

Unfortunately, Craig also elaborated on some of Obama’s less than realistic or desirable foreign policy beliefs. He states:
"As flawed as it is, [the UN] is still the place people go to solve [international] problems. Not only about war and peace, but also about poverty and development, disease and the future of the planet.”
Really? Can Craig legitimately look at the UN’s track record over the last 10 years and say such a thing with a straight face?