The latest ill-considered idea to ‘help’ people has been withdrawn in the face of withering scorn. The city of Houston, Texas, briefly considered paying off some personal debts for first-time homebuyers:
Mayor Bill White yanked a controversial plan Tuesday that called for the city to use taxpayer funds to pay off some personal debts for first-time homebuyers, following a flood of outrage and criticism from across the city and beyond.
Some Republican governors are still considering whether to reject the cash promised to the states in the stimulus package:
“My concern is there’s going to be commitments attached to it that are a mile long,” said Texas Gov. Rick Perry, who considered rejecting some of the money but decided Wednesday to accept it. “We need the freedom to pick and choose. And we need the freedom to say ‘No thanks.”
Why has the government adopted such a fundamentally different approach in regards to how they have dealt with the housing crisis as opposed to the auto crisis? Since the inception of the latest housing crisis, strategies intended to deal with the problem have been a bottom-up approach: stimulate demand at the product level. Every solution to date has been designed to deal with the issue’s root causes (i.e. foreclosures, falling home prices, high mortgage rates), and thus stimulate consumer demand in order to correct them.
Why hasn’t this approach been taken with GM and Chrysler? The government’s approach with these automakers has been to pump repeated billions into the top, in hopes that it will trickle down to consumers. Since the automakers’ fundamental problem is that Americans aren’t purchasing their vehicles, why hasn’t the government taken the same approach they’ve taken with the housing industry and provide consumer incentives to purchase their vehicles?
Even though details about the mortgage-assistance program announced by President Obama are still sparse, some are questioning how fair the program will be to homeowners who aren’t in trouble — and who will ultimately foot the bill:
The questions found in the letter from Cantor and Boehner to Obama include:
A last-minute insertion into the ’stimulus’ bill — limits on bank CEO compensation — is likely to have unintended consequences:
But CEOs at even midtier and much smaller banks are paid far more than the $500,000 limit set by the White House, or the bonus cap of one-third of total compensation set by the new amendment. For instance, M&T Bank (MTB) has assets of $65 billion and has received $600 million from the U.S. Treasury. CEO Robert Wilmers’ compensation in 2007 totaled $1.15 million, which included a salary of $646,154 with the rest coming from bonuses and other items such as pension benefits.
You don’t have to be a market analyst to have known this request was coming any day now. According to several sources, auto-parts suppliers have made a request through the Motor & Equipment Manufacturers Association to Treasury officials for a direct loan of $10 billion. Suppliers also requested another $10.5 billion for automakers that would allow them to pay parts suppliers within 10 days instead of the traditional 45:
For the direct loans, suppliers individually will have to apply for the money. But the association wanted to give Treasury some sense of how much money will be needed for suppliers, [President of the Original Equipment Suppliers Association, Neil] De Koker said.
The Obama administration has announced that executives at certain banks which have received TARP funds will have their pay capped:
The Obama administration outlined plans today to tighten restrictions on executive compensation for future recipients of federal aid under the government’s financial rescue program, but the large majority would be able to opt out of most of the limits.
We have seen the government aid given to financial institutions come with a lot of excess baggage and political influence (recall Citi’s controversial change of heart regarding their support of mortgage cramdowns). Government interaction in the marketplace has already begun to alter the natural flow and structure of things. But the latest bailout idea may be the most dangerous of all.
A idea being floated in Pennsylvania is to use state funding to prop up two failing newspapers. Philadelphia Media Holdings — the company which owns the Philadelphia Inquirer and the Philadelphia Daily News — is in default on its loans. Reports say their owner went “hat in hand” to PA Governor Ed Rendell looking for help: Read the rest of this entry »
General Motors is in quite a predicament. With sales tanking, and the repayment of a government loan looming, the automaker is forced to balance a strict budget — all the while promoting several brands that have already lost some significant identity.
After making several budget cuts in the sports marketing department, GM’s vice president for North American marketing says he doesn’t foresee any additional big cuts in their sports sponsorships. GM’s absence will be felt after they declined (wisely) from advertising in the marketing mecca known as the Superbowl. The automaker has also ended a contract a year early with golf icon Tiger Woods for their Buick brand — a deal which cost GM $7 million a year.
You can’t make stuff like this up:
A group of Democratic governors warned Friday that without as much as $1 trillion in federal assistance, many states will not be able to pay their bills in the next year.
“There are states that are talking as California has of not being able to meet their financial obligations in the coming months,” New York Democratic Gov. David Paterson said on a conference call with reporters. California announced in December that all state employees would be forced to take two days of unpaid leave.
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.
