Really Pissed Off!

The badly needed Housing Bill was signed by a reluctant President Bush, establishing a $300 billion fund to help qualified homeowners avoid foreclosure, as well as a blank check bailout of Fannie Mae and Freddie Mack. However, the government bailout of Fannie Mae and Freddie Mack should concern everyone who pays taxes, as this may well be a “Black Hole!” It appears that the government bailout of Fannie Mae and Freddie Mack could be “unmitigated disaster” as we finally see the ugly head of Corporate Socialism.

The House of Representatives and Senate had bills before them to bail out both institutions. The House passed their bill on July 23rd by a vote of 272-152, while the Senate passed it on July 27th by a vote of 72-13, for President Bush’s signature. He has chosen not to veto the bailout packages after conferring with Treasury Secretary Henry Paulson and Chief of Staff John Bolton. This badly needed legislation may offer help not only to troubled homeowners, but to first time buyers, as well as veterans. Although this bill would offer relief to up to 300,000 homeowners, this is but a small fraction of projected foreclosures, which could reach 2.5 million homeowners According to Bloomberg, during the second quarter of 2008, “1 out of 171 households was foreclosed on, received a default notice or was warned of a pending action.” "Mark Zandi, chief economist for Moody's Economy.com. estimates that 5.5 million loans will default by the end of 2009, with about half of them going into foreclosure." Keeping this in mind, The Housing Bill resembles the fabled Hans Brinker, who placed his finger into a hole in the dike to prevent a flood! This is not the first time that RPO has dealt with this subject as in September of 2007, we asked "The plunging Real Estate Market: Is this the tip of the iceberg?" In it, we took on the banks, mortgage companies and the government for allowing the possibility of a crash. That was then and this is now...and where the Hell are we? That iceberg is about to sink our ship!

This bill, although appearing substantial, is small change next to the bailout included for Fannie Mae and Freddie Mack, which most news reports have placed on the back burner. Both are assured of the Federal Government’s guarantee of up to $5 trillion dollars in mortgages, as they back more than one half of the nearly $12 trillion dollars on the nation’s mortgages. The bottom line to all of this is that the American taxpayer will be at the bottom of the pile upon whose shoulders the responsibility of payment will be placed. Ultimately, the American taxpayer will share the undo burden for Fannie Mae and Freddie Mack and the failed mortgage market. The mortgage crisis may only be one of several potential disasters awaiting us, as the rise of credit card debt has risen over the same period. Desperate consumers are turning to credit cards in an attempt to delay the inevitable. What we may witness is a "House of Cards", as banks tighten mortgages, while flooding the market with an excess of credit cards. Who is more likely to grab the easy credit, which banks continue to make available? The same unfortunate souls who are about be face foreclosure! Not only will they loose their homes but they will probably default on their credit card debt as well. As credit card use surges, the results could be catastrophic! This is the Number One Issue in the 2008 Presidential Campaign, but who can best address this problem? History has shown us that this favors Barack Obama, as when facing a tough economic times, the American voter will elect the party out of power. No matter who wins, the Economic Crisis facing this nation may be too large for any one party to deal with. It will take a concerted effort, both on the Congress and the White House to try to find a way to get out of this mess!