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Cui Bono: Obama readies another mortgage bailout

The loudest objections are being registered by holders of mortgage bonds, who would take a hit if loans are paid off early. Some fund managers have loaded up on agency mortgage-backed securities, those bonds backed by mortgages guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association, because they offer higher yields than U.S. Treasuries. Last week, the $5.4 trillion agency MBS market recorded one of its worst weeks in a year as traders dumped mortgage bonds out of concern the White House would put forward a plan that would shoulder them with losses. While mortgage rates have been hovering around record low levels, banks remain stingy with lending although they are sitting on more than $1 trillion in excess reserves. Homeowners without a job or good credit histories have been essentially shut out of the refinancing process. Some investors say the economic benefit of a government-encouraged refinancing wave would be minimal. “It’s a political hail Mary. It’s unclear why they want to throw a monkey wrench into a $5 trillion market,” said John Kerschner, head of securitized products at Janus Capital Group in Denver. He said the net benefits for the economy are negligible, perhaps adding $20 billion to $30 billion “at best” to the U.S. economy.

1 Comments in Response to

Comment by David Jackson
Entered on:

   I can't begin to say how glad I am that I don't own anything, and that I'm not an "economist"!

   Where has it ever been written, or even suggested, in earnest, that anyone in the Obama Whitehouse is remotely interested in "saving the economy"? the first bailout was a simple "trickle-up" economy maneuver. This one will renew loans; get people seriously indebted,f or a longer term; keep the "favorite bums" of the banking system from having to take back a bunch of home they don't want; and, probably, manage to make a whole bunch of people forget that they are being played for all they are worth. (I spoke to a professor this week, who became very upset by my statement that government is the root of all social ills, since it fails on the grandest of scales to effectively manage the social infrastructure, administer the wealth of the nation, and provide even a modicum of real physical security (boarders and 9/11, if your memory is short), as always promised (lied and sworn to, an oath of office is a sworn statement of intent to keep and honor one's word, and carries with it a reasonable expectation of success, at least in the attempt to live up to the terms of the "contract").

    As intellegent and schooled as this professor is, she is, apparently, very much a creature of "her" culture and generation: it appears that she somehow has developed a selective memory, choosing to ignore the very history she lived through - 1960's, 70's, etc. It amazed me that she could have experienced the manipulative failures of the government of the era, and somehow come away with the notion that the culpability for the social ills of our nation and the world lies somewhere in an undisclosed netherworld...I simply don't know how to respond to her. Everything that has ever gone wrong in this country can be (mostly, has been) directly attributed to failed governmental programs or corruption. You tell me: Who is incharge of administering the wealth of our nation? Who is supposed to see to it that we are not invaded or attacked by foreign or domestic enemies? Who is supposed to defend us by supporting and defending our human, civil (Constitutional) rights? Who claims to be concerned with and capable of guaranteeing full and proper education to all children? Who pretends to protect us from crime and criminal conspiracies? [I say the government (selected officials) claims to be our champion, in all these matters, but does not and has not lived up to the task(s). We are the means to a free ride and job security for a whole gaggle of the least of us - all types of politicos.]

  I base my thesis on the recorded history of the past 500 years of "U.S." history.



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