More Bailout Mania

Just when you thought it was safe to go back into the water ... Even as I was writing yesterday's post, House Speaker Pelosi and a group of US governors were meeting to hammer out details (read: pork) of a $500 billion stimulus package. Early hints are that it'll include extension of unemployment benefits (read: incentive to remain unemployed instead of taking a job now, which seems counter to the package's stated intent of creating jobs, but just as there's no "I" in "team," there's no "logic" in "legislation"); money for road and infrastructure construction (hopefully those jobs pay well enough to entice people off the unemployment rolls); money for the states to spend as they see fit (pork); a middle-class tax cut (define "middle-class," please); and "investments in renewable energy" (the benefits of which we'll hopefully see in our lifetimes).

I'll bet the OMB is having a devil of a time keeping up with their budget deficit projections. I hope they're using pencil.

After the TARP was passed, Congress created a panel to oversee its deployment (gee, wonder what that cost?). The head of the panel, in an early report, has concluded that "the government does not seem to have a coherent strategy for easing the financial crisis," according to the New York Times, which went on to report that "the government instead [seems] to be lurching from one tactic to the next without clarifying how each step fits into an overall plan."

Really? We had to create an oversight panel to reach that conclusion? I think the markets have already figured that out, and publish their own "report" with every 500-point drop in the Dow.

The panel's chairwoman also said that while giving banks money to lend appears to be a good idea assuming the problem is a lack of said funds, if the problem is really that borrowers' creditworthiness is deteriorating along with the economy, "pouring money into banks isn't going to fix that problem."

Again, we had to create an oversight panel to figure that out? Not to pat myself on the back, but Congress could save a lot of taxpayer money by just reading this blog.

The Detroit Three are back in Washington today, as this is the deadline for them to offer up a plan that will convince Congress that it's worth giving them a pile of bail-out money. I'm betting they get it. Merry Christmas, Mr. Taxpayer.

A final whimsical note: Fannie Mae and Freddie Mac announced on November 20 that they will temporarily halt foreclosure actions on occupied homes while they work on a mortgage modification program. The suspension will last through the holidays (Merry Christmas, Mr. Deadbeat Homeowner), and will affect about 16,000 borrowers.

Gee, that'll help tons. Total foreclosure filings in the US in October alone were about 280,000.

On a related note, B of A's aggressive plan to modify about 400,000 mortgages has hit a snag: bondholders have filed a class-action suit against the bank to kill the plan, which would place the financial burden of the modifications on bondholders. The suit calls for B of A to buy back the securitized loans before they can modify them, which would place the estimated $8.4 billion cost of restructuring the mortgages back on B of A. The CEO of the firm that brought the suit to court correctly noted, "Until we talk about protecting investors, desperately needed capital will not flow back to this market."