Even though this story was making the rounds five days ago, it’s somewhat new to me. It seems rumors are flying that Barack Obama is preparing an August surprise that amounts to forgiving billions of Fannie and Freddie home mortgages that are under water. This explains why Obama lifted their bailout caps in April, which has allowed him to infuse the GSE’s with all the taxpayer cash they need. As James Quinn notes, Fannie and Freddie have an unlimited appetite. They’ve eaten up $151 billion of taxpayer dollars so far, and they’re not anywhere near being satiated.
If Barack Obama actually goes through with this scheme, it would be a blatant attempt at vote buying designed to minimize or possibly reverse the slaughter the Democrats are expecting at the ballot box in November, a shockingly unethical use of the American people’s tax money.
The questions swirling around this rumor are obvious: 1) will Obama actually do it and 2) will it give the Democrats the boost they need to maintain control of the House and Senate?
James Pethokoukis has the details of this rumored mortgage forgiveness program:
The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:
1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.
3) Keep in mind the political and economic context. The nascent recovery is already running out of steam. Wall Street economists just downgraded the government’s second-quarter GDP estimate of 2.4 percent to around 1.7 percent. And as even Treasury Secretary Timothy Geithner is warning, the unemployment rate may well begin to rise back toward the politically toxic 10 percent level given such sluggish growth. Many in the White House thought the unemployment rate would be dropping sharply by this point in the recovery.
But that is not happening. What is happening is that the president’s approval ratings are continuing to erode, as are Democratic election polls. Democrats are in real danger of losing the House and almost losing the Senate. The mortgage Hail Mary would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes.
Of course the economy isn’t recovering. The gargantuan spending programs the Democrats implemented are antithetical to economic growth. You can’t shrink the private sector in an effort to grow the public sector and expect to have a thriving economy. That they actually thought they would tells us how utterly ignorant they are on matters of economics.
Now, what about those Americans who will be forced to pay for these subsidized mortgages? How will they receive equal protection under this new government program?
The answer is that they won’t. Rather, they’re being set up. Obama looks at the millions of Americans who were responsible and sees personal ATMs for all those voters who have upside down mortgages. These folks will soon learn what it is like to be used as indentured servants who will have their taxes confiscated for the purpose of bailing out millions of other Americans, all for the Democrats’ political benefit.
Alexis de Tocqueville once said, “the American Republic will endure, until politicians realize they can bribe the people with their own money.” Obama’s Fannie and Freddie mortgage bailout, should it see the light of day, is exactly what he was talking about.
Cross-posted at KimPriestap