Tuesday, December 15, 2009

Great moments in the history of statism Pt. VII

A reporter from the Clevand Plain Dealer got out from behind his desk, did a little digging and found that the city of Cleveland was handing out home loans via HUD’s Afford-A-Home program to homeless and jobless people with the entirely predictable results.

The city of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford, a Plain Dealer investigation has found.

The city provided mostly low-income buyers with down payment loans of up to $20,000 through the federally funded Afford-A-Home program, but did little to determine whether the people could actually afford to keep their homes.

That lack of oversight persisted for years, even as hundreds of loan recipients defaulted on mortgages, many within two years, the newspaper found by analyzing property and loan records covering the period between 2000 and 2007.

In other completely unrelated news today….

First, it was S.W.A.T teams and then naughty and nice lists published by Treasury Dept. and now what is going to be affected to spur banks to lend to homeowners and businesses? How about more arm-twisting by the President?

Meeting with top executives from 12 financial institutions, Mr. Obama sent a clear message that the industry had a responsibility to help nurse the economy back to health and do more to create jobs in return for the huge federal bailout last year that kept Wall Street and the banking system afloat.

But Mr. Obama also confronted the limits of his power to jawbone the industry as banking companies continued to repay government money received in the bailout. Citigroup and Wells Fargo, two of the biggest, announced on Monday that they were doing precisely that.

President Obama pressured the heads of the nation’s biggest banks on Monday to take “extraordinary” steps to revive lending for small businesses and homeowners, prompting assurances from some financial institutions that they would do more even as they continued to shed their supplicant status in Washington.

Don’t think it was coincidence that both Citigroup and Wells made this announcement when they did. They want to eliminate as much bully pulpit leverage from the government as fast as humanly possible.

For their part, a few of the banks, did make some specific pledges to increase lending to small businesses. No such pledges were reported as being made for the housing sector, though.

The banking executives promised Mr. Obama that they would take second looks at loans they had denied over the last year. Richard K. Davis, the chief executive of US Bancorp, told reporters after the meeting that the executives were aware of the public perception that they were profiting with hefty bonuses at taxpayer expense, and that they realized they were “under a microscope” and needed to align themselves more closely with the needs of consumers.

Call us crazy but perhaps the loans were denied the first time around because they were bad risks. One would think that the banks might have some expertise in that area. But forgive our lack of populist outrage regarding bank executive compensation when we stand dumbfounded observing an alignment of circumstances that look eerily similar to that which caused this meltdown in the first place.

But as we've said all along, the statist solution to failed statist policies is just more statism.

More "Great moments..." can be found here.

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