Friday, April 4, 2008

Congress is Rushing to Help Home Owners!!! (Not)

I just wanted to go out to the weekend with this post... it is really quite reprehensible ... we are being fed that Congress is working furtively to help out homeowners with some version of a bailout. Notwithstanding that I hate all these bailouts, at least be intellectually honest with people.

What is really happening? The banks and the home builders are getting the lions share of the benefits. The banks I can understand... they are powerful, they have a huge lobby, they have a lot of friends and relationships in D.C. But homebuilders? That relatively small group? I wonder why they suddenly have so much power.... but then I remembered about a month or two ago, they insisted if they do not get relief (mommy I need my tax rebate), they'd be suspending contributions to the politicians coffers.... and nothing gets a politicians attention like less funding for their re-election campaign. From an article on 2/14/08
  • The National Association of Home Builders, one of the top 10 corporate donors to politicians, has stopped contributing to congressional candidates after it failed to get what it wanted in recent anti-recession legislation. (I admit, i did not know they were one of the top 10 donors)
  • The powerful lobby said Tuesday that it was taking the unprecedented action of halting its campaign-giving to protest Washington's failure to address "the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward." The group did not mention any specific initiatives.
  • The association had unsuccessfully pressed lawmakers to adopt a provision to reduce the tax liability of home builders by allowing them to offset their past profits with future losses. (which is what they are getting now)
  • Election experts said the lobby's move illustrated how closely interest groups tie their donations to the decisions they hope lawmakers will take on their behalf -- a connection that usually goes unspoken. "This demonstrates in a starker fashion than we're used to seeing how groups use political contributions to promote their positions in Congress," said Kenneth A. Gross, a campaign finance lawyer at Skadden, Arps, Slate, Meagher & Flom.
  • The home builders' announcement also explodes the oft-repeated assertion by politicians that lobbyists deal with them only at arm's length. "How many members of Congress have you heard say, 'People donate to me, but it has no effect at all'?" Sloan said. "What the home builders have done is expose the underbelly of the connection between money and politics."
So what happened? It didn't even take 60 days and we already have programs being rushed through to make sure the homebuilders are suckling contentedly from the nipple that is the taxpayer's money. Awwww.... isn't that sweet? And we can even put a cute and fuzzy label on it "Foreclosure Prevention Act of 2008" that makes the peons in the country feel like Congress is hard at work to help them out. It's all so beautiful... I need to go dab my eye with a tissue. It is amazing to see how efficient Congress can be, when it is looking out for its own interests - when it comes to other things they fight and stall and get nothing passed for years. This is your country - I'd just like more people to see what really goes on behind the scenes so this is why I throw it on the blog. Cramerica... for the corporation... by the corporation.
  • Homebuilders and the mortgage industry are emerging as big victors in a bipartisan agreement reached by Senate leaders on legislation designed to limit the housing crisis.
  • The $15 billion Foreclosure Prevention Act of 2008, expected to be debated Thursday afternoon on the Senate floor, is drawing fire from critics who say it would do little to actually prevent foreclosures. The bill contains a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year timeframe. That's good news for big homebuilders such as KB Home and Pulte Homes Inc., which have been saddled with massive losses over the past year.
  • Other big beneficiaries would be Wall Street banks such as Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley. In fact, any company now struggling after years of healthy profits that pumped up their tax bills could benefit. (shocker!)
  • While Democrats and Republicans called the bill a productive bipartisan compromise, Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington, questioned whether the trade off was worthwhile for Democrats. "This is first and foremost helping the big villains in the story," he said.
  • Earlier this year, the National Association of Home Builders was so dissatisfied by lawmakers' actions — notably not including the tax provision in the economic stimulus bill_ that it snapped shut its political purse. NAHB said it would stop making contributions to congressional candidates "until further notice." Since 1990, the trade group has given nearly $20 million to federal candidates, with 35 percent going to Democrats and 65 percent to Republicans, according to the Center for Responsive Politics. (that's a hell of a return on investment, $20 million over 18 years buys you $6 billion - now that's a return on capital!)
  • The bill also contains $4 billion in grants to local governments to buy and refurbish foreclosed homes, new authority for states to issue bonds to be used to refinance subprime mortgages — those made to borrowers with poor credit — and a $7,000 tax credit for people buying properties in foreclosure.
  • It includes an additional $100 million — half of what Democrats proposed — for credit counseling to help homeowners avoid foreclosure. And the agreement permanently raises the limit for loans backed by the Federal Housing Administration to $550,000. That amount had been temporarily raised to nearly $730,000 as part of the economic stimulus bill signed by President Bush in February. (oh I missed that part... more high priced homes thrown into FHA - I was assured this was a TEMPORARY provision just a few months ago? anyhow... $100M for counseling peons, $6B for homebuilders - sound equitable)
  • Homeowners facing bankruptcy, however, won't find relief in the proposal. The mortgage industry fought fiercely to spike a provision to let bankruptcy judges rewrite the terms of distressed mortgages. It won that battle; the provision was left out. (let me guess, the mortgage industry is also a top 10 donor to political campaigns....)
  • The absence of bankruptcy intervention was criticized by 15 civil rights, labor and consumer groups — including the Center for Responsible Lending and the Consumer Federation of America. In a joint statement, they called lawmakers' actions "a win for the financial services industry that brought us this mess."

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