Thursday, April 01, 2010

Larry Kudlow criticizes Obama's latest attempt to prop up housing prices

 Like me, Larry Kudlow doesn't like President Obama's latest attempt to subsidize irresponsible banks and homeowners:
Yet again, Team Obama is rewarding reckless behavior, punishing the 90 percent of responsible homeowners who are making good on their mortgages, and setting up a greater moral hazard that will surely lead to an expansion of bailout nation.

I’m talking about an add-on to HAMP, the $75 billion Home Affordable Modification Program, which has been a dismal failure. In fact, the entire foreclosure-prevention effort — including forgiveness of mortgage-loan principal — has been a failure.

The Office of the Comptroller of the Currency reports that nearly 60 percent of modified mortgages re-default within a year. And now comes a new, brilliant idea that if you live in your main residence, have a mortgage balance of less than $729,750, owe monthly mortgage payments that are not affordable (meaning greater than 31 percent of income), and you demonstrate a financial hardship, the government will subsidize you by offering TARP money to banks and other lenders to reduce your outstanding mortgage balance.

Former Bush economist Keith Hennessey highlights the outrage that Team Obama would actually subsidize people making up to $186,000 a year who have a mortgage balance of over $700,000. This isn’t even a middle-class entitlement. It’s an upper-middle-class entitlement. Actually, at $186,000, it’s virtually a top-earner entitlement, according to Team Obama’s definition of rich people eligible for tax hikes.
But Larry, don't we need to keep housing as expensive as possible?
Bloomberg financial columnist Caroline Baum argues that lower home prices are the key to solving the housing problem. Popular blogger Barry Ritholtz says we need more foreclosures, not fewer, to solve housing. Both are correct.


  1. oh well. Be it now or 10 years from now, the Piper WILL BE PAID. I wont own a home during either time, I just cant afford one, I only make $95K a year here in DC.

  2. Wow, long term, DC home prices are the strongest in the nation:

  3. This has to end badly. The next thing will be to wipe all debt clean and seize all assets. Tabula rasa.

  4. "Wow, long term, DC home prices are the strongest in the nation:"

    Yep exactly why its the WRONG time to buy in DC. Buy low, sell high is how you make money.

  5. "Yep exactly why its the WRONG time to buy in DC. Buy low, sell high is how you make money."

    Or you could just buy high and use your home for shelter. Making money can be done by providing something that benefits society.

  6. You think money is made by providing something that benefits society?! LOL

    I dont know which is more stupid... the fact that you think money is made by benefiting society or saying it makes sense to spend everything you make from society on an over priced 60 year old p.o.s. house just for "the shelter."

    A bit of advice for fantasy land amateur philanthropist with stars in your eyes...

    If you want to make a dime in this world, you do it to benefit YOURSELF. This has nothing to do with providing anything other than an exchange that benefits YOU. Which would mean not to invest in a house for shelter during the highest peak in recorded history. Take your hard earned money and invest it in something that will give YOU a benefit and rent in the mean time.

  7. "Take your hard earned money and invest it in something that will give YOU a benefit and rent in the mean time."

    I did. Now I'm grown.

  8. Of course that guy is another No NO NOOO opposition conservative type. Even a broken clock...

    He was also DEAD wrong during the bubble. Laughing at Schiff for being a chicken little. It is just so easy to be right when the market is going up.

    Of course I agree that propping up the market is a terrible idea. But if the president was a republican he would make every excuse to go along with the "much needed injection of liquidity."

  9. The problem with the Obama plan is not that he's doing anything at all, it's that the program is far too limited. HAMP could work, but the restrictions on principal reduction require so many steps and consequences to be fulfilled that, ultimately, borrowers just can't seem to get there.

    And in what way is this punishing anybody? This seems like yet another unfounded talking point.

  10. We rewarded the bankers for bad behavior, so why not reward the homeowners, its a much smaller chunk of money.