Wide-Ranging Reaction to Obama Housing Plan
Consumer Federation of America praises: " a coordinated set of initiatives that, taken together, mark a fresh and welcome new chapter in the government’s response to this ongoing crisis ... These changes to the bankruptcy law will help consumers who reach a more equitable resolution of their debts, and should encourage lenders to match President Obama’s package of other initiatives to help homeowners avoid such a fate."
As does Center for Responsible Lending: "An essential part of the plan permits distressed homeowners to seek loan modifications in bankruptcy court, an option now permitted on other types of loans that are far less important to families and the economy. This provision will provide a new avenue for reducing hundreds of thousands of foreclosures without requiring any tax dollars. Equally important, it will provide stronger incentives for loan servicers to offer effective loan modifications outside of court. Allowing homeowners access to the courts means that voluntary private efforts to prevent foreclosures will work better—and, in doing so, will benefit the entire economy. And paired with the comprehensive and well-thought-out modification plan, many fewer families will need to take this course."
Bloomberg reports bankers mollified by nuanced bankruptcy court proposal:
...JPMorgan Chase Chief Executive Officer Jamie Dimon said in an interview that modification in bankruptcy will be “the last resort, not the first resort.” He called Obama’s plan an “elegant” way for homeowners to have recourse if they’re unable to change loan terms by any other means... ...“My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair-market value -- as long as borrowers pay their debts under a court-ordered plan,” Obama said yesterday in Mesa, Arizona.
David Leonhardt on NYT blog Economix:
...the number of homeowners that the White House estimates will be helped by the refinancing part of the plan — between four and five million — includes many who are not now underwater. Their mortgages are worth between 80 percent and 100 percent of their house value, which means they are above water but cannot refinance. (On many refinancings, banks require the equivalent of a 20 percent down payment, in the form of house value.)
So this plan will help only a small fraction — perhaps one in 10, or even less — of underwater homeowners. And it will provide only a modest subsidy to those it does help.
But as I wrote this morning, such an approach has many advantages. About $500 billion worth of mortgage debt is now underwater, and the number may eventually get close to $1 trillion. A plan that tried to put this debt back above water would be vastly more expensive than the one Mr. Obama announced today. It would also deliver less bang for the buck, since a great majority of underwater homeowners are likely to continue making their monthly payments.
McClatchy gets "wait and see" from congressional TARP watchdog: "'It's a bold plan and that's encouraging. But at this moment, we don't have enough detail, and unfortunately with the foreclosure mitigation plans, the devil is in the details,' said Elizabeth Warren, a Harvard University law professor who heads the Congressional Oversight Panel charged with monitoring use of taxpayer bailout funds. 'There have been big headlines in the past and the details never caught up with the early promises.'"
Portfolio.com's Felix Salmon: "I have to say I like the look of Obama's housing-bailout plan. It's quite elegant, and makes full use of the fact that Fannie and Freddie are now owned by the US government -- which means they can be forced to offer 105% loan-to-value mortgages even when the borrower isn't creditworthy at all. Obviously, all of this comes at a cost to the US government: the figures being bandied around today range from $75 billion in the NYT to $275 billion at Bloomberg. But really nobody has a clue how much it will cost: that's entirely dependent on whether or not the plan succeeds in arresting the fall of house prices."
Big Picture's Barry Ritholtz: "The Obama plan is a little better than I expected, but it still dances around an issue that is sacrilegious to many economists: Home prices are still way too high for any stabilization an/or housing bottom to form."
TNR's Noam Scheiber: "one of the fairer criticisms of the plan is that it's overly incrementalist--that it only targets a subset of the mortgages that are underwater ... and therefore leaves the housing market vulnerable to a big wave of defaults down the road ... [but] if I had to choose the one area where I thought he could get away with a little less, housing would probably be it."
More takes at Economist's View
More Stimulus Needed, Here, There and Everywhere
W, Post reports on the Fed's grim economic outlook: "It could take years for the nation to fully bounce back from the recession, according to new projections by leaders of the Federal Reserve, who indicated that even once the economy starts expanding again, it will be an 'unusually gradual and prolonged' recovery. The unemployment rate will remain elevated through at least 2011, according to the policymakers' official forecast, released yesterday, and the economy this year could shrink by 1.3 percent. That would mark the sharpest contraction in 27 years."
That assessment was made in January, before the economic recovery plan became law. That's why more "substantial and sustained" stimulus, as opposed to merely "timely and targeted," is likely needed.
Matt Yglesias, in American Prospect, calls for coordinated global stimulus: "The world needs a coordinated response in which each country commits to undertake stimulus that's appropriate to the size of its economy and to its position in the global balance of trade. Further, we need a serious international commitment toward rebalancing in the medium-term -- to a weaker dollar, less U.S. consumption, more American exports, and less foreign economic dependence on the U.S. consumer market as an employment strategy."
Washington Monthly, FireDogLake and Daily Kos rip Republicans for lambasting the stimulus, then taking credit for specific projects.
Next Week's Budget Could Spark Health Care Reforms
Politico previews, pointing to the role of Obama budget director Peter Orzag:
Though the budget’s details have been closely held, Orszag revealed, in broad terms, two: A continued focus on health care policy; and a plan “to restore the nation to a sustainable fiscal trajectory over the five-to-ten year window.”
The next step on health care, he said, is a set of “changes to Medicare and Medicaid to make them more efficient, and to start using those programs more intelligently to lead the whole healthcare system.”
With a growing body of research finding some practices more cost-effective than others, the programs reimbursement rules can be used to force changes at those hospitals – a sort of back door to health care reform.
“Medicare and Medicaid are big enough to change the way medicine is practiced,” he said.
The push to use changes to Medicare and Medicad reimbursement rates won’t come without a fight. Critics see the call for efficiency as easier said than done, and largely a smokescreen for simply saving money for cutting federal payments to doctors and hospitals.
The Plum Line: Obama May Talk About Health Care During Big Prime-Time Speech
Parsing Opaque Obama on Trade
OurFuture.org's David Sirota criticizes Obama trade rhetoric in advance of today's Canada trip: "Though he reluctantly went on to say he thinks labor and environmental protections need to be put into NAFTA, the way he structured his comments - specifically, the way he juxtaposed economic growth against reformed trade - seems to subscribe to the discredited concept that making trade rules more fair somehow at odds with economic growth. Oddly, he's implying this at the very same time he has said worker rights (ie. The Employee Free Choice Act) and environmental protection (for example, investing in green jobs) are key to long-term economic growth here at home."
The Nation's John Nichols says Obama is being "mushy": "The new president sounds a lot better than Bush – or [Canadian PM] Harper – when it comes to trade policy. But Obama is still a little mushy when it comes to explaining how hard he will push to reduce the damage done by badly-drawn trade deals."
Green Moves, Every Which Way
NYT reports the Obama admininstration will soon be regulating carbon emissions:
The Environmental Protection Agency is expected to act for the first time to regulate carbon dioxide and other greenhouse gases that scientists blame for the warming of the planet, according to top Obama administration officials.
The decision, which most likely would play out in stages over a period of months, would have a profound impact on transportation, manufacturing costs and how utilities generate power. It could accelerate the progress of energy and climate change legislation in Congress and form a basis for the United States’ negotiating position at United Nations climate talks set for December in Copenhagen.
W. Post says Sen. Reid will push hard on clean energy: "Not satisfied with the billions for clean energy projects in the stimulus package, Senate Majority Leader Harry Reid (D-Nev.) said today he will work to pass a new energy bill within a matter of weeks [and] asked Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) to prepare a bill that will set a national renewable portfolio standard [mandating a percentage of electricity to come from renewable sources.] ... Once the energy bill is done, Reid said, legislators will turn their attention to climate change legislation that could pass the Senate "later this summer." "That could involve cap and trade or a carbon tax," he added.
Grist on coal comments from Energy Sec. Chu: "Chu said on today's call that funds from the economic recovery bill will be used 'to explore various technologies' for cleaning up coal, including coal to liquid technologies and carbon capture and sequestration. 'It's a realization that coal is plentiful, it is abundant, and it plays a major role in our electricity, and we need to figure out ways to clean that up,' Chu said."
Save Our Environment coalition releases 2010 "Green Budget" (via Daily Kos): "representatives of more than 25 conservation organizations have prepared a 'Green Budget' that makes a case for strengthening funding for the environmental programs that fund lands and wildlife, energy, transportation, air, water, public health, and oceans."
Are Blue Dogs Helping or Hurting EFCA?
The Plum Line reports: "Blue Dog Democrats in the House have asked House Dem leaders to postpone a vote on the Employee Free Choice Act until after the Senate votes on it, and the Democratic leadership has agreed, a senior House Dem aide tells me."
More Plum Line: "The House Dem leadership’s perspective is irking some labor officials, because they’d hoped for the House to pass a strong version up front, and because letting the Senate go first could push back the bill’s timing. But instead of fighting the decision, labor officials are saying they’ll almost certainly accept it."
MyDD's Josh Orton: "this move sacrifices progressive negotiation with Senate moderates. Rather than force them to decide which House-passed provisions to oppose, Blue Dogs want Senate moderates to preemptively shot-call."
D-Day: "Some may be inclined to see this as some sort of big sellout to labor, but honestly I don't. It's a reflection of political reality."
Yglesias: "Ben Smith writes that 'the campaign against [EFCA] is also taking its toll on moderate Democrats in the House and Senate, as this Arkansas News column vividly illustrates.' What the column illustrates is that Blue Dogs like Rep. Marion Berry who supported EFCA in the last congress are now telling business leaders that they did so only because they knew the bill couldn’t pass, and now they’re going to the House leadership and whining that they can’t support the bill."
HuffPost's Art Levine on new CAP report regarding unions and the economy: "...if unionization rates today were the same as they were in 1983, an additional $49 billion could be pumped into the economy by workers represented by unions. As the report co-authored by David Madland and Karla Walter says, 'in 1983, 23.3 percent of American workers were either members of a union or represented by a union at their workplace. By 2008, that portion declined to 13.7 percent.' And, as Reich and the report noted, 'Workers in unions earn 30% higher than non-union workers.'"
Banking Update
WSJ spots new Treasury assessment, bank lending would have been worse without TARP:
Some of the largest recipients of aid from the government's $700 billion financial-rescue plan didn't increase lending to consumers and businesses in the last three months of 2008, the Treasury Department said. A Treasury survey of the 20 largest banks that have received funds through the government's $250 billion capital-injection program disclosed that lending in the last quarter of 2008 was stagnant or declined slightly...
..."In the face of severe economic deterioration during this period ... lending levels largely held steady and would have likely been lower absent capital provided to banks," the Treasury said. That is a switch from the administration's previous posture on bank lending. Treasury and other administration officials have said that the expected decline in fourth-quarter lending was a sign that the program wasn't working as intended.
OpenLeft's Chris Bowers slaps corporate-friendly Dems looking to lead on financial regulation: "it takes an extraordinary level of deference to the financial sector to argue that the real problem with the federal government's relationship with that industry is that it often over-regulates."
NYT notes latest financial scandal also stems from lax Bush regulation: "Years before the Stanford Group was accused in a worldwide fraud, American financial regulators found significant securities violations at the company that some experts say were telltale signs of deeper problems. But each time the regulators ultimately let the company off with relatively small fines, records show ... Experts said that the earlier violations amounted to a series of red flags of deeper problems. Officials at the S.E.C. said Wednesday that they were reviewing the regulatory history of Stanford, and whether the agency — often accused of lax enforcement — should have been more vigilant in this case."
Using Our Money To Take Away Our Access to Courts
HuffPost's Ian Millhiser and TortDeform's Kia Franklin on TARP-funded banks lobbying for anti-consumer tort reform.
Sebelius to HHS?
Kansas City Star: "Earlier The New York Times had reported on its Web site that Obama had 'settled' on Sebelius as his top choice, but a White House spokesman told The Star that characterization went too far."
Ezra Klein has qualified praise: "Sebelius is a choice for Health and Human Services, not health reform. She'd be a newcomer to Washington, with few contacts on the Hill and little knowledge of the players or the process"
Peterson Watch
Jane Hamsher: "Hedge Fund Billionaire Pete Peterson Key Speaker At Obama 'Fiscal Responsibility Summit,' Will Tell Us All Why Little Old Ladies Must Eat Cat Food"
