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August 4th, 2009

More Clunker Cash Could Be Months Away

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That’s even if the money comes at all. The likelihood that the Senate will vote to approve $2 billion more in clunker cash before their summer recess is fading rapidly. For Senators, summer vacation is just days away, and political analysts say that lawmakers may not have enough time, or enough votes for that matter, to approve the extra cash. Bipartisan opposition is growing.

Even if the money is approved, as the Financial Times points out, if the legislation differs even slightly, the pending approval must be sent back to the House for further deliberation.

In less than a week, 250,000 vehicle purchases were made via the program. While the number is a mere speck of a typical year’s auto sales (about 15 million), it’s certainly a surprising draw that drained the program’s $1 billion budget in just days.

On the surface, the program is a win-win for all parties involved. Consumers clearly displayed their eagerness for the vehicle discounts, depleting the program’s funds far faster than anticipated. Since the Cash for Clunkers caters to both domestic and foreign vehicles, auto-production plants in both the south and the mid-west are seeing the benefits. Lastly, for certain politicians, especially for those seeking reelection, it’s a chance to gain a boost with voters:

In addition, it is evidently popular with the voters. “Most politicians wouldn’t want to stand between a speeding car and free cash,” says Kevin Book, an energy analyst in Washington. “For politicians it is ideal: an industrial policy with quick payout to the voters.”

While some lawmakers are using the appeal for more cash as a way to gain favor with voters, others are seeing it as another poorly-conceived plan by the current administration:

Republican senators described the scheme…as a “boondoggle” – or a waste of time and money – and all but threatened to filibuster the planned extension.

Republicans pointed to the fact that an initiative that was estimated to last about four months, but only lasted about four days:

“When the administration comes bearing estimates, it’s not a bad idea to look for a second opinion,” said Mitch McConnell, the Senate minority leader. “All the more so if they say they’re in a hurry.”

At this point it seems like a long shot that the money will be approved by the Senate in the exact manner laid out by the House before the end of the week.

Who wants to see more money approved? Who wants the program to die on the vine?

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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