Behold … H.A.R.P.

Reuters Political Blog: An August Surprise from Obama?

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

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.

Johnny brought this to my attention and, honestly, I don’t know what to think of it. If the White House would be looking at the chance to essentially buy votes with an enormous bailout for bankers as a vehicle for political gain, I don’t think this HARP will work. Author James Pethokoukis notes that “[t]he 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,” but I think that any attempt to weigh political gains and losses need to look at those two factions individually.

First, “those offended” will be further offended by HARP. Those people, that first faction, are the ones who will very likely hand Barack Obama and his party a devastating loss at the polls in November. They look at any sweeping action originating in Washington, D.C. as detrimental to their lives, lifestyles and bank accounts. They root for governmental inaction. So, while HARP might be another piece of legislation that President Obama could include in his list of accomplishments in the presidential debates preceding the elections in 2012, for now any action from Capitol Hill would be perceived as action taken against the interests of the American people.

Second, those “grateful Americans” will likely be those that the Democrats are already counting on to temper the sting of the losses in November. They’re the inner city voters who have not yet figured out that this administration’s “accomplishments” have made the prospect of recovery and job gains less likely than it was before the uncertainty from the stimulus bill and the health care bill and everything in between took hold. They’re also the ones who will look unfavorably on any assistance given by this administration to banking institutions, and they will be more susceptible to advertisements correctly showing that the Democrats are just as in-bed with bankers as are Republicans, if not more so.

At the end of the day, HARP is just another excuse for this administration to trade taxpayer money for strings-attached governmental control. Right or left, there is no political gain to be had here. If the president and his party is looking for political gain, they should announce the extension of the Bush tax cuts, and further cut taxes across the board. That, my friends, would be a start. That, my friends, could save their own butts. They could call it DARP: Democrat Action Relieves their Posteriors.

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Comments

  1. Anonymous says:

    When does it end?

    WWTJD

    What would Thomas Jefferson do?

  2. Robert Wallace says:

    Jeff-

    Yeah… I still disagree with you on this one. There are a couple of things to consider.

    First of all you have to keep the current situation in mind. This decision isn’t being made in a vacuum. It’s being made on the eve of what everyone agrees is going to be a very, very bad year for the Democrats. And that means its going to be a very, very bad year for Obama. Because if/when the Democrats lose the House and Senate in 2010 the party is going to largely blame Obama. Which means that the Obama Administration has their back up against a wall politically. They are desperate, and that’s going to make them consider risky bets.

    Next you have to look at the downside: it might piss of the Tea Partiers. Oh noes! First of all, Obama doesn’t take them seriously. Secondly, even if he did there’s little damage to further ticking them off. The Tea Party vote is already about as mobilized as it can get. You can’t really get them any more mobilized than they already are.

    Finally: consider the upside. The immediate beneficiaries are going to be happy, obviously, and that’s 15M households. Which translates to 15 – 30M votes, or easily up to 10% of the entire electorate. That’s huge.

    But the real payoff isn’t the immediate one. It’s the chance to win a message war. The independents and moderates who gave Obama the White House have deserted him in droves partially because the mood of the country is swinging to the right, but mostly because they just don’t think he’s accomplished much. Political principal has nothing to do with it, and if Obama can convince them that this is his decisive leadership in action then he singlehandedly wins back his 2008 mojo and casts the GOP as the party standing between ma and pa and economic recovery based on abstract principles that – just to pound it home – independent voters don’t care about.

    And finally keep in mind that Obama won in 2008 because of turnout. Right now his base is 30% mobilized and the Tea Party is 90% mobilized (numbers completely made up). If he doubles them both, then his base goes to 60% and the Tea Party just inches up to 100% (cause there’s just not room for a lot more mobilization on that side).

    So yeah – I think that the risk/reward ratio is high enough to make this a political gamble, especially when he’s fighting to stay on top of his own party.

    Do you think he hasn’t read all those articles about Hillary Clinton in 2012? Because he has. And that’s really what this is about. He’s trying to help the DNC in 2010 to avoid being mauled by his own in 2012.

  3. Boston Blackie says:

    Jeff,
    Put my name in the pissed off column – ENOUGH ALREADY!!
    As I just commented on your article about Obeyme’s birthday, what about us who followed the rules. What about the ones that got to refinance their mortgages under one of the previous bailouts(so many, I can’t remember which one). Within months, the majority was once again delinquent on their mortgages.
    Do you really believe it will effect 15M, we know how good this admin is when it comes to fuzzy math. If so can’t we all get that type of deal.

  4. Barney loves Freddies Fannie says:

    Will they write off Charlie Rangel’s tax debt? dumb question

  5. Running out of other peoples money....socialism says:
  6. Anonymous says:

    Behold C. R. A. P.

  7. Thomas Jefferson says:

    What would Thomas Jefferson Do? Ban Wall Street and demolish the Fed, of course.

    “The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals… it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.” –Thomas Jefferson to John W. Eppes, 1813. ME 13:430

    “Private fortunes, in the present state of our circulation, are at the mercy of those self-created money lenders, and are prostrated by the floods of nominal money with which their avarice deluges us.” –Thomas Jefferson to John W. Eppes, 1813. ME 13:276

    “All the capital employed in paper speculation is barren and useless, producing, like that on a gaming table, no accession to itself, and is withdrawn from commerce and agriculture where it would have produced addition to the common mass… It nourishes in our citizens habits of vice and idleness instead of industry and morality… It has furnished effectual means of corrupting such a portion of the legislature as turns the balance between the honest voters whichever way it is directed.” –Thomas Jefferson to George Washington, 1792. ME 8:344

    “We are now taught to believe that legerdemain tricks upon paper can produce as solid wealth as hard labor in the earth. It is vain for common sense to urge that nothing can produce but nothing; that it is an idle dream to believe in a philosopher’s stone which is to turn everything into gold, and to redeem man from the original sentence of his Maker, ‘in the sweat of his brow shall he eat his bread.’” –Thomas Jefferson to Charles Yancey, 1816. ME 14:381

    Sources: http://etext.virginia.edu/jefferson/quotations/jeff1325.htm

  8. Jeff Schreiber says:

    Robert — great points, all. On my end, though, I think he doesn’t stand to win over anyone new, just as you believe he won’t lose anyone new. I think where you and I deviate is in the question of momentum; I believe it’s far gone on his side, that in order to win more than he’d lose on this, he’d have to have the mo’ in his favor, and he just doesn’t. It’s going to be an unnecessary expenditure of political capital without any long-term upside.

  9. Sums it up says:

    5:55

    Community Reorganizer Ascends to Presidency

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