One of the most impressive aspects of Barack Obama’s presidential campaign was its meticulous branding. Beyond the stunning “O” insignia, there was the ubiquitous slogan of “change”; the splotchy Obama-looking-yonder-hopefully headshots; the prevalent use of “Gotham” font; and the navy-fading-to-sky-blue backgrounds, which were used to create a distinctly messianic effect. Much like an advertising campaign for a brand of toothpaste or fast-food chain, it seemed as though every aspect of Obama’s presidential run was market-tested so as to be instantly recognizable to the average consumer (i.e., voters).
Naturally, the expectation was that this obsessive marketing would end following the campaign. After all, the American presidency is one of the most recognizable brands in the world: the office comes with a full array of institutions, insignias, and a theme song already in place – all of which are far more symbolically potent than anything that a campaign could possibly produce. Yet the typically impatient Obama team refuses to wait until January 20th, and has thus stylized every aspect of the presidential transition with its usual corporate touch.
Perhaps the most odious feature of ObamaTM is the transition team’s press conference podium, which bears a sign reading “Office of the President Elect.” Naturally, the sign’s color matches the Obama campaign’s hope-inducing sky-blue backgrounds – consistency is, after all, critical to effective marketing. But the sign is notable for a second reason: namely, there is no such thing as the “Office of the President-Elect” – the Obama team has totally invented this concept solely for the purpose of pushing the Obama brand! Indeed, former presidents-elect – recognizing that they were neither on the campaign trail, nor in office just yet – generally spoke from blank podiums.
Other aspects of this seemingly endless ObamaTM-branding are, perhaps, subtler. There’s the $30 Obama-Biden victory t-shirt, which calls to mind to the similarly overpriced apparel that championship baseball teams typically sell. There are the virtual commercials that the Obama transition team has produced for some of its major policy areas, which set a new standard for premature overuse of the presidential seal. And there’s this “American Moment” page, which solicits voters’ personal stories in a manner eerily similar to this page on Coca-Cola’s website. (Meanwhile, private companies are apparently trying to latch onto the ObamaTM brand: check out STA Travel’s package deals to the presidential inauguration.)
One wonders whether the mainstream media will eventually catch on. After all, for the past eight years they’ve complained that the Bush administration was too tight-lipped – too few press conferences with the president, too little transparency. Now they have an incoming administration that promises an all-access backstage pass, but instead offers a masterfully crafted advertising campaign. Indeed, the Obama team might be using new media to promote a new political brand, but a blind taste test fails to notice a difference.
… and, yet AGAIN, the Forgotten Man (and Woman) in all this is the one who bought only what he could afford, has continued paying her mortgage flawlessly, and now has a mortgage on a property worth $170,000 less than it was in 2006 — and often (really often) $20-40K LESS than the balance of the mortgage on it.
I call this person the Forgotten Man advisedly, because this person, who may well have NEGATIVE net worth, is the one picking up the tab for EVERYONE ELSE.
I do feel most sincerely for the people who have lost their jobs, and as Stein says, we have programs to help them already. But millions of us are already paying the price for the stupid mortgage borrowers and speculators, in seeing our equity go up in smoke, and knowing it’s going to be a while before the homes we bought and are maintaining in good faith will be worth something reliable again. Now Obama wants us to suck it in even further, and function as a financial ServicePro for these other middle-class, able-bodied people: Make It Like It Never Even Happened.
The market has spoken. No confidence for Obama Administration.
What we really need are thousands (millions ?) of Tony Rezkos to assist with the purchase of those homes. Some people I could think of would never have afforded the home they bought without the assistance of Tony who was there at the right time. Maybe Obama can clone Tony Rezko.
Of course, the friends of Angelo did pretty well too but Angelo isn’t available anymore,.
“The question is whether the president does.”
Actually, the question is whether the president does or if he does, if he cares? Depending on how that is answered marks a great divide in either intelligence or ideology.
What I don’t understand is this deathly fear of foreclosures. Anyone who is familiar with Texas real estate in the late eighties after the collapse of the energy business and the S&L crisis will know that the current fear is way overblown. There is life after massive foreclosures–without any sort of borrower bailout.
The non-flippers (i.e., the majority of home owners who intend to live in their homes indefinitely) just stay put, perhaps foregoing moving to a larger home for a few years. Alternatively, if they have the stomach for risk, they take a loss on their current property and buy a bigger property with the same size mortgage. When the market turns around in a few years, they come out way ahead. Similarly, renters who were looking to buy are presented with a great entry opportunity. Investors looking to pick up rental properties are similarly incentivized.
Today’s situation is of course different in its risk to the banking system. But it seems that as long as the banks are protected from failing, the marketplace with work through the foreclosures on its own, albeit over a painful few years. There’s no need for $300 billion of taxpayer money to cushion the shock for private individuals who made poor investments.
Let’s see, individuals who made bad life decisions, now they’re financially up against the wall, it’s only right to do something to help them out. O.K., what’s the government program to help the fathers caught in the child support trap? The hundreds and hundreds of thousands of fathers being forced to support TWO families because the federal government has subsidized women walking out on the fathers of their children. Or is all that fed money going to go the National Endowment for the Arts and light rail construction?
#5, I am one of those homeowners who was foreclosed on. I bought a $280,000 home, put $70,000 down, and thought my wife and I could afford the home. This was based on a combined income of $70,000. We got a fixed interest rate and read our documents. We still couldn’t afford the home. We didn’t do Bush’s Hope for Homeowners program because our foreclosure was our problem, not the government’s. We rent now and I am studiously putting money away because I know that homes in the future will be much more affordable. This is the responsible thing to do.
People who buy too much home that they can’t afford are in the purest sense acting greedy and slothful. People who refuse to allow themselves to be foreclosed on so the next family can come and buy the home are being selfish. These vices are being reinforced by Obama – and Bush – with these cockamamie housing foreclosure plans that prevent the markets from clearing. Obama should reconsider this plan.
“The only people affected by plummeting real estate prices are the ones who bought a house that cost more than they could afford, hoping for a spike in value so they could sell at a profit or take out a new loan based on an increased value.”
Whatever you think of Obama’s solutions, the quoted statement is one of the stupidest things I have ever read. Our economy is in the tank because people won’t spend, and they won’t spend because they know – or their banker knows – that they no longer have equity in their homes. Leave aside the problem of the people who can’t “stay put” – let them rent castles – the idea that the only affect falling home values has is on people who actually find themselves foreclosed on is just so ignorant as to make one wonder why in a country beset by unemployment a fool like Mr. Stein still has a job.
Bu Jen is right. It’s not just Santelli. I do, however, question the premise that finding a second for Santelli’s rant somehow makes him right. There are many, man people who should know better but don’t. Now we can name two. The three-letter bumper sticker for towns called “Bedford” comes to mind.
Make that “the only effect.” Wouldn’t want to be caught misspelling in a post that calls someone else dumb.
TOP 10 LEGISLATIVE CHANGES NEEDED TO WRING EXCESSIVE LEVERAGE OUT OF THE U.S. FINANCIAL SYSTEM
1. Full income and asset documentation required for any mortgage loan; 10% minimum down payment required for everyone for fixed rate loans (which cannot have a duration of less than seven years); 20% minimum down payment required for everyone for variable rate loans of any kind (same minimum duration); the monthly mortgage loan payment may not exceed 31% of the gross annual income of the borrower(s); “no doc” mortgage loans restricted only to those borrowers who have owned their own business for at least three years and who present at least three years’ of filed federal income tax returns; no teaser rates permitted; and any variable loan to have a maximum interest rate cap at three percent above the introductory interest rate.
2. Reinstate the up-tick rule for short sales of stocks.
3. Reinstate the Glass-Steagall Act to divide commercial banks from investment banks. The concept of a universal bank is dead.
4. For publically traded investment banks, require a leverage maximum of 10 dollars at risk for every dollar of base capital, and tightly and narrowly define base capital and risk.
5. Prohibit commercial banks and investment banks from purchasing (not selling to third parties) mortgage-backed securities whose principal and interest are not guaranteed by the U.S. Government; and institute for commercial banks a leverage maximum of eight dollars at risk for every dollar of base capital, and tightly and narrowly define base capital and risk.
6. As of 12/31/2009, stop paying interest on bank reserves on deposit at the Federal Reserve Board.
7. For publically traded companies, commercial banks, investment banks, insurance companies, and retirement funds, eliminate all off-balance sheet liabilities that are not backed at least 50% by hard liquid assets (not including any mortgage-backed securities unless payment of their principal and interest are guaranteed by the U.S. Government) deposited in an interest-bearing account at the Federal Reserve.
8. Require any instrument that promises payment of any third party obligation under any circumstance (e.g., credit default instruments, collateralized debt obligations, etc.) to be backed at least 25% by hard liquid assets (not including any mortgage-backed securities unless payment of their principal and interest are guaranteed by the U.S. Government) deposited in an interest-bearing account at the Federal Reserve.
9. Establish a clearing house through which all trades of any instrument that promises payment of any third party obligation under any circumstance (e.g., credit default instruments, collateralized debt obligations, etc.) must be cleared. No more private party transactions.
10. For the Chief Executive Office, President, Chief Financial Officer, Controller, and Chief Investment Officer of any publically traded company, commercial bank, investment bank, insurance company, or retirement fund whose organization violates any of 1.-9. above, increase their personal penalty to 50% of those individuals’ respective net worth, in addition to jail time.
That ought to do it.
Why not just nationalize the banks and have you administer them?
Mr. Kramer – You’re obviously smarter than Stein and I would like to learn from you. I have two questions for you:
1. If unwillingness to spend is the issue, what is the effect of a program that takes money away (through taxes) from those who did not put themselves in the position of having no equity in their homes?
2. I have taken about a 30% hit in my 401k. I would spend more than I am spending now if the government gave me money to make up my losses. Is that a good idea?
Every time a hose goes into foreclosure it puts another house on the market reducing the equity of all those that are in same market. Foreclosed houses are also vacant which reduces the value of the houses in the neighborhood. The goal of Obama’s plan is put a floor on housing prices to stop the destruction of wealth. To do this you have to help owners that have a chance of paying their mortgages. The direct benefit is not the point it is the indirect benefit that goes to those who were responsible in there mortgages.
Remember a 100% of the Banks are undeserving. They pay outrages amounts of money to their employees under the guise of being able to predict what happens to the markets. The banks also had a lot more information at their disposal to know what the home buyers could afford. You can have some sympathy for buyers who took an overly optimistic view of what they could pay. But the lenders were professionals. They had a fiduciary duty to their shareholders.
Not every action rewards the deserving. If you don’t like Obama’s plan describe how you are going to stop the wealth destruction in the housing market and the stock market. Because if it doesn’t stop everyone is going to lose.
SmokeVanThorn -
Thank you for your kind words, but I’m not sure I can add much that will help you.
1. I’m not aware that the current program is taking any money away through taxes. I thought 95% of people were getting tax cuts. So it’s not clear what program you have in mind. If you mean the taxes that will have to be raised in the future, that’s not money that could be spent today, so, again, the question just doesn’t seem to parse. I hate to see your thirst for knowledge go unslaked, but I don’t see how it’s to be helped.
2. The point of the housing bail-out is not to replace lost value with dollars; it is to stimulate the economy by removing the overhang of excess housing inventory. Replacing everybody’s 401(k) losses might very well accomplish the same thing, but I suspect at a cost in the multitrillions, which seems, I don’t know, sort of wasteful. You seem to be suggesting an analogy between a wasteful 401(k) dollar-replacement plan and the catalyzing stimulus created by removing excess housing inventory. Sadly, there isn’t any such analogy, so the fact that the 401(k) thing makes no sense sheds no light on the program the government is trying. Again, no joy in Mudville.
My disappointment at not being able to help you is almost as great as your curiosity.
Mr. Kramer
1. I thought your justification for the “mortgage bailout” was that is it would increase willingness to spend. Without using conclusory words like “wasteful” or “catalyzing,” can you explain why a 401k bailout (or providing monetary relief to anyone who engaged in a transaction after which the value of the item in which the person speculated declined) would not have the effect of “stimulating the economy.”
2. Do you contend that the prospect of increased taxes in the near future (2010) does not affect economic behavior, including spending?
3. How can taxes be cut for 95% of people given the large percentage of persons who already pay no income tax?
4. Would you agree that the top 5% need help with their mortages and will not receive a direct benefit from the “mortage bailout” so increasing taxes on them alone for this purpose represents a transfer of wealth, the only justification for which some alleged indirect benefit in “stimulating the economy?” Would a good name for this be “trickle up economics?”
1. I said that the 401(k) thing WOULD stimulate the economy, but that it would cost trillions of dollars and so is wasteful (not to mention the commensurately worse problems of moral hazard and inflation that would follow).
2. The possibility that taxes will increase in 2011 – I believe the current rates apply through2010 – on a small percentage of the population does not suppress spending nearly as much as the overhanging inventory of real estate that exists right now. I don’t like the increase, but I can’t make it do more damage than it will do. To say that something “affects economic behavior, including spending” is not to say that it will strangle the economy. There is such a thing as a modest effect.
3. As I understand it, Obama’s tax plan includes a reduction in payroll taxes for low-wage workers, or increases in the EIT, or some other break. But no matter. He’s not proposing a tax increase on anyone before 2011, and the spending is meant to happen now. If you want to use a number that is less than 95%, use one. It’s still an aggregate tax cut, at least until 2011, and probably beyond, although I don’t know or care about that.
4. No, the top 5% do not need help with their mortgages. But I do agree that the wealthy are being taxed in 2011 to cover the cost of stimulus in 2009. You can call it whatever you want. What possible difference would that make?
Yeah,
Got to keep those sheepeople in those houses that they over paid for in that inflated market.
If too many of them loose their houses won’t have properties to raise taxes on.
let’s REALLY be fair – let’s end the tax deduction on interest for mortgages – after all, doesn’t that reward home buyers at the expense of everyone else? Not interested? Didn’t think so…
“Got to keep those sheepeople in those houses that they over paid for in that inflated market.”
This would be a lot more convincing of the right wing was as vociferous when it came to bailing out Wall Street and the banks. Yes, some people objected – but the Republicans gave Bush his bailout. Now – when middle class and lower middle class people are involved – well, now greed is a horribile sin that must be abolished. Even if you’re right – you’re wrong…
Lawrence Kramer Says:
“He’s not proposing a tax increase on anyone before 2011″
Open the morning paper genuis, unless this is an attempt at comedy. Among other 2009 tax increases on business and individuals in his budget, he seeks to phase out mortgage interest deductions for couples making over $208,000 (not $250,000 but the White House says it’s close enough just 2 days after he pledged it again ).
As to the substance of your arguments and setting aside the philosophical objections that many of the non-idiots have to this perverse plan (ironic that you actually mention moral hazard to refute the 401k example while endorsing this one BTW, unless it was another attempt at comedy), is the fact that it doesn’t fundamentally address the issue and will be ineffective.
This part of the plan effectively turns people into renters for 5 years via government and lender subsidy to keep them in the home if they wish. However, their incentive to abandon the house remains, especially as the motivation for many of these people was the flawed assumption that homeownership was a compelling investment. They believed that leverage and price appreciation made it a no-brainer compared to renting, no matter the price paid. So with no hope whatsoever of having positive equity in the foreseeable future, the utility of the home will be evaluated according to its utility as a dwelling relative to renting.
It’s not only the definition of moral hazard, it’s a waste of money. But that’s nothing new.
Warpublican — you’re kidding, right? What the hell is fair about that?
Taking a tax deduction on mortgage interest doesn’t take anything away from anyone.
Try to remember that taxation is government confiscation of private wealth.
Warpublican, do not miss the distinction between this “bailout” and the ones you mention, because there is a big one.
All of them to this point–even the auto bailout–had not been structured as straight giveaways. They were loans or they were equity invesetments with some hope of repayment or return (though in the case of the autos, I’d say not). Still, should any of the bailouts prove effective, the government/taxpayer stands to gain, however unlikely. It was not something for nothing.
Much like the quick flipflop from Monday to Wednesday on tax increases of $208,000 compared to $250,000, days before unveiling this giveaway program Obama himself said that probably the homeowner assisted should give up some future upside to the government. Indeed, a plan that would have reduced principal in exchange for sharing future appreciation with the government and/or lender, would have not only been more effective in stopping foreclosures but would have removed some of the moral hazard contained in what he did instead. It also would have been consistent with the other bailouts to date.
Instead, he made it another social welfare, wealth transfer program where the government just hands out money, in this case to pay mortgage interest.
Brian -
What do we say about stupid attacks on stupid ideas? What do we infer about the views of someone who criticizes stupid attacks on stupid ideas? The usual inference here is that the critic supports the stupid idea. But that’s not always the case.
I was surprised to read about the mortgage deduction, although the provision appears to apply not only to that but to all itemized deductions, including charitable gifts and, I suppose state and local real estate and income taxes. I think it’s a horrible idea. and it sure as hell is a tax increase. I’m not sure how I was supposed to know about this morning’s news last night, but one can’t demand too much logic or civility on these blogs, can one?
Every bail-out creates some degree of moral hazard. Hell, all insurance creates some degree of moral hazard. Sometimes, the moral hazard created is an acceptable cost, sometimes it isn’t. The silly 401(k) thing would create, IMHO, an unacceptable level of moral hazard, whereas slowing foreclosure rates by bailing out borrowers in some manner would not.
Actually, I don’t know how well the foreclosure thing will work. My narrow argument was that who gets helped doesn’t matter; what matters is the effect on the real estate market. I don’t recall arguing that it would actually have the advertised effect, just that its advertised effect is not rendered irrelevant by the “unfairness” or moral hazard it might create in the process.
I’m not sure what point you are making about turning people into renters. I get that they have none of the incentives of homeowners, but I would think they would be like rent-control beneficiaries, living in a better place than they could afford on the open market, and so would choose to stay rather than leave. The inventory of houses for sale is the bogey, and I would expect that the bargain rents these people would pay would reduce that inventory. (If this blog were searchable, you’d find a post somewhere weeks ago where I said that the best solution was to replace underwater fixed-rate mortgages with shared-appreciation mortgages.)
But that’s not a philosophical or partisan position, just my best guess at how people will respond to carrots and sticks. I have no problem with the notion that I or anyone else has the wrong answer to the right questions. My problem is with people who ask the wrong question, like whether the bailed-out borrrowers “deserve” our help.
I’m listening right now to CNBC discussing Barney Frank’s insane attack on Golf. I have no doubt that the liberals in Congress and the White Hose are going to do way more harm than good. My purpose in posting here, though, is to preserve some intellectual rigor in our attacks on their stupidity. Of course, it may be a mistake to insist that our attacks make sense – in politics, any stick is sometimes good enough to beat a dog – but I’m still of the mind that conservative objections should make sense, and the “who deserves to be bailed out” issue is the kind of misguided, first-order anaylysis that liberals are so good at. Asking whether borrowers deserve help without looking at the effect on the real estate market is like asking whether bank clients “need” golf outings without regard to the impact on our travel industry. It’s short-sighted, and it forfeits the philosphical high ground to people who don’t even know there is one.
Mr. Kramer
I think we all understand your shifting, faith based positions now.
BTW, I took a look at the budget tonight, and it appears that the deduction limitation for high earners does not go into effect until 2011, at least that’s the first year in which savings from it are projected. So maybe I was right that Obama has not proposed to raise anybody’s taxes until 2011. That doesn’t make the deduction thing good policy, but does suggest that ready, fire, aim, is not a good way to compose blog posts. Also, the line item says that it would apply only to incomes above $250k (married). I know the first higher-than-28% bracket starts below that point, but that doesn’t mean that the effect could not be offset by a credit for incomes up o $250k. Or that the whole thing isn’t just a bargaining chip that the Senate wouldn’t let happen anyway.
From the Wall Street Journal:
“President Obama has laid out the most ambitious and expensive domestic agenda since LBJ, and now all he has to do is figure out how to pay for it. On Tuesday, he left the impression that we need merely end “tax breaks for the wealthiest 2% of Americans,” and he promised that households earning less than $250,000 won’t see their taxes increased by “one single dime.”
This is going to be some trick. Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can’t possibly raise enough revenue to fund Mr. Obama’s new spending ambitions.
Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and “the wealthiest 2%.” Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That’s about 7% of all returns; the data aren’t broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% — about 1.65 million filers making above $388,806 — paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.
Note that federal income taxes are already “progressive” with a 35% top marginal rate, and that Mr. Obama is (so far) proposing to raise it only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He’d also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won’t come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need.”