This is one instance where I fully support President Bush's veto.

ISM outlook survey

Manufacturing:
* Operating rate is currently 78.6 percent of normal capacity.
* Production capacity is expected to increase 2.5 percent in 2008.
* Capital expenditures are expected to increase 1 percent in 2008.
* Prices paid increased 6 percent through the end of April 2008.
* Prices are expected to increase an additional 2.5 percent for a total increase of 8.5 percent for all of 2008.
* Manufacturing employment is expected to increase 2.9 percent during the remainder of 2008.
* Manufacturing revenues are expected to increase 1 percent in 2008.
* Overall, manufacturing is expected to grow marginally in 2008.

Non-manufacturing

* Operating rate is currently 85.9 percent of normal capacity.
* Production capacity is expected to increase 3.9 percent in 2008.
* Capital expenditures are expected to decrease 2.7 percent in 2008.
* Prices paid increased 5.7 percent through the end of April 2008.
* Prices are expected to increase an additional 1 percent for a total increase of 6.7 percent for all of 2008.
* Non-manufacturing employment is expected to increase 0.7 percent during the balance of 2008.
* Non-manufacturing revenues are expected to increase 2.7 percent in 2008.
* Overall, non-manufacturing is growing at a slower but sustainable rate.

The fun thing is they list who they expect increases in any subject and it appears the most optimistic 1st.

Industries expecting higher-than-average rates of price increases in 2008 are: Real Estate, Rental & Leasing; Accommodation & Food Services; Arts, Entertainment & Recreation;

So RE is more optimistic than Food(who already have price increases) and A&E who always have price increases.

It's not a bad survey, I just like knocking off a point or too for bravado.

Vikram - this isn't FHA looking to do this. This is Congress pushing it back administration resistance.

Barely - it is LTV as of the day of the appraisal. There are limits on how stale the appraisal can be, but I think the limits are two or three months. A lot can happen over that time span.

ugh - Fannie is refinancing its own credit risk. FHA is taking on new risk.

One can disregard the Moral Hazard and think it's inoperable. But the consequences of ignoring it are likely to bite us on the ass.

Well, it's already bitten us in the ass.

The Greenspan Put in 1998 got us the tech bubble.

The tech bubble bailout (more Fed rate cuts) got us the housing bubble.

Now the housing bubble bailout has gotten us the commodity bubble and $124 dollar oil.

And all this has given us an economy that's been growing below trend since the 1980s and dramatically below trend since 2000 with no apparent prospects for improvement in the near term.

All of this coincides with the emergence of the use of interest rate policy in the late 80s to "stimulate" the economy.

We're going to stimulate ourselves all the way to 3rd world status.

ipodius writes:
I'm sorry, I've just read the synopsis of the bill. Can someone explain to me what this actually would do other than, i don't know, make congress look busy until jesus comes?
ipodius | 05.08.08 - 6:53 pm | #

And Bush will veto it besides so they don't even get an attaboy when Jesus finally arrives. All those trees killed and hot air passed at hearings for nothing... except pretty cool campaign speeches.

What was Miley Cyrus thinking? Did anyone check?

Bobby when are you going to check out your new place in Vegas?

I think that there should be an amendment to this one that if you do take the principal reduction then you have to allow a homeless person refuge for 6 months a year... Lets complete the loop....

GG, Exactly. Let's move on to something that matters like "what was Miley Cyrus thinking?"

Elvis writes:
What was Miley Cyrus thinking? Did anyone check?

"Do I have what it takes to be a Glam Girl?"

i respect that there is much truth in the criticism voiced by the majority of those who posted above.

but let me ask you this question. does someone have a better plan than trying to keep resident home owners (not flippers and speculators) in their homes?

and can we agree that if the fed and congress fail to take some action...if not this, than some preferred action, then we are headed, as a society off of a financial cliff??

i understand the angst about others getting a freebie when we (myself included) scrimped, saved invested and didn't piss in the well.

but bitchin about a bailout at this point is kinda like refusing to help bail, or row because we didn't strike the iceberg in the first place, so screw everybody?

i'd love to be wrong about this.

--
"I'm reading Rothbard's America's Great Depression."

Tank,

What page are you on?? I read it 10-12 years ago and it is time to re-read it (beginning right now). I like Rothbard's views.

Jas

--
"Why not just permit inflation to run loose and let borrowers pay back their debt with cheaper dollars? Oh yeah, that's being done."

iceman,

Can't be done. That would be too easy and the real world doesn't accommodate wishful thinking of the cunning (borrow and let the debt be mostly wiped out by inflation). What lies ahead IS deflationary depression. Debt would be even more crushing burden.

The battle of Ice or Fire would be won by Ice! Get ready.

Jas

charlie writes:
Essentially this bill will put a floor on what a lender can lose in foreclosure. In exchange, the lender agrees to take a hair cut on the current loan. The size of the cut varies.

Makes sense to me. Isn't this really what the game is all about, stopping the cliffdive in home prices before those falling prices pull down any more banks etc.? When the TV cameras are on, the political class acts as though the point is compassion for families facing foreclosure, but there's more to it than that.

I guess you can't bail out homeowners without bailing out the banks, and vice versa.

to Ben's bailout bonanza,
i don't see a big difference between adjusting the rate verses adjusting the principal,(face value) the question is who makes up the difference and good people can disagree.

to ac...
yeah i know you are right to be concerned, the gov does not have a sterling track record when it comes to these things, but, sometimes they make the grade
i agree that there is a risk that gov action makes it worse...giving the addict another white line makes the addiction stronger...but sometimes ya gotta cut back before you quit or there's a seizure and the heart stops.

Anonymous, "Where you going to draw the line..." i haven't got an answer for that...still thinking, but not to be rhetorical...isn't a partial pay back of debt better than millions of people throwing up their hands and going BK?
given the circumstances maybe we draw a pretty generous line.

America’s Great Depression by Rothbard: “We may well remember the errors of smugness and complacency that our economists, as well as financial and political leaders, committed during the great boom [of 1920s]. Study of these errors might even chasten our current crop of economic soothsayers, who presume to foretell the future within a small, precise margin of error.”

No chastening ever took place and the current crop is lot more smug and complacent. You can guess what I think of economists – Propagandists in the extreme.

Jas

Me thinks that Lenders will only offer this reduction in principle option to borrowers that file Bankruptcy. The unintented consequence will be that people that work hard to pay their bills on time will get nothing, and that the deadbeats will be rewarded for being deadbeats.

Harsh reality quoted mock,

"...isn't a partial pay back of debt better than millions of people throwing up their hands and going BK?"

and Harsh reality asked,

Better for who?
Better for lenders? YES
Better for mortgage debters? NO
Better for renters? NO
Harsh Realty | 05.08.08 - 8:34 pm | #

mock back to ya

my wife and i are fiscally conservative because we heard plenty, believe me, plenty of great-depression stories from ALL 4 of my grandparents...and glad they told them.

But Harsh, really, i cant think of any way that it would be a better world for me and my children and our community if we go 1929 again (or some rhyme of it)

sure i got the money to buy up a lot of RE and. or equities cheap...but will that compensate me for all the ugliness around us?

Anonymous wrotes:
we are headed, as a society off of a financial cliff??

No kidding, nice to see you noticed.

Mock says,

for two years i've been reading roubini... and CR for well over a year. i didn't just join the party.

the wake up call for me was Volkers stanford speech around april 2005...i remember what he said about there could be social disintegration or words to that effect

i agree with you we are very likely seriously f^c&#d...and we aint gonna get kissed first.

There is a lot of elbowing and positioning and jawboning going on about who should absorb the losses. Bernanke hints lenders should make concessions... bills like this one that look for a write-down to 85%.

At some point the veneer of politeness will wear through and things are going to get really, really mean. At some point the banks are going to say: we didn't sell houses to people, we rented them money and they are stiffing us. They really won't want to go out of business just because it might make things easier for the government.

Barney Frank was wondering out loud on the Bloomberg interview if the veto threat was a hollow threat with the intention of forcing the Senate to craft a version more to the White House's liking.

Lama, I am not in any way referring to the IRS tax code.

CNN reports: a gated ghost town in Las Vegas. (Scroll down to first "Top Stories" video in link.)

I'm against a bail-out, too, but the proposed law or similar measure seem to me a possible way to hold up contract law (if lender AND borrower have to agree) while minimizing the fall-out of the housing bust:
1. First and most important, assure a reliable appraisal process, because the proposition depends crucially on the correct 85% (if it is too high, the US treasury will pay too much)
2. Make a FHA loan only if the buyer can truly afford it, use traditional measures
3. Make the loan full-recourse, regardless of state law, to protect the federal purse, and give the IRS the job to garner the wages of homedebtors who walk away despite being able to pay

I read this stuff and it takes me back to junior high school, listening to Dr. Demento dredging up classics like....

The other day, I ate a ricochet biscuit.

That's the kind of biscuit that's supposed to bounce off the wall back in your mouth. If it don't bounce back...

...you go hungry!

(The Chips, 1956)

After slamming the FHA-MBS Dodd-Frank bailout idea back when it was first floated, I have to admit it has changed a great deal and is no longer quite the same beast.

Going to 85% of "current" market value seems like it would be about right....

But....

Of course, the devil is in the details.

Who says what the "current" market value is?

Will it be comparisons that are 4 months old, for instance, thus adding a pleasant 10% or more to prices?

The obvious danger is always when public dollars are at stake, then the individuals making the decisions don't feel much concern about the exact numbers....

So the instincts of many to still oppose the bill are reasonable.

We need to see specific sharp details that make that "current market value" an actual current market value, and not a trick.

If that happened, then 85% of that would still be a bailout in California probably, but not so bad a one that we have to feel especially ripped off as taxpayers.