"The Real Solution To The Housing Crisis"

Home foreclosures will keep rising next year no matter who is elected president in November.

Even the optimism that surrounds a new president taking office cannot resurrect home values overnight, and presidents have no direct ability to reduce rising mortgage rates. Nevertheless, Democrat Barack Obama and Republican John McCain both promise help for homeowners facing foreclosure.

Obama supports a broader role for government than does McCain. Both envision the Federal Housing Administration providing new, cheaper mortgages to distressed homeowners who otherwise would have difficulty refinancing into more secure government-insured loans with lower monthly payments.

For the plans to work, lenders would have to be willing to take a substantial loss by reducing the amount owed on the loan. But some would have a powerful incentive to do so. A refinancing deal could allow them to recover far more money than they would get from the costly process of foreclosing on the property and trying to resell it.

Obama supports legislation along these lines by Sen. Chris Dodd, D-Conn., that would help about 400,000 homeowners. People would not have to have good credit to qualify as long as they could show they can afford the new payments.

"If the government can bail out investment banks on Wall Street, we can extend a hand to folks who are struggling on Main Street," Obama said.

In addition to his FHA proposal, Obama wants to create a $10 billion fund to counsel distressed homeowners before they slide into foreclosure; help people sell homes they bought but could not afford; and team with state governments, community groups and lenders to ensure sure loans can be modified in a timely manner to avoid foreclosure or bankruptcy.

His approach, reflecting the traditional Democratic preference for greater government intervention, would establish a 10 percent mortgage credit for people who do not itemize their taxes. That would provide 10 million homeowners, most of whom earn less than $50,000 a year, with an average of $500 in savings, according to his campaign, and help those struggling to make mortgage payments.

The FHA piece of the Dodd plan would cost close to $1 billion. The money would come from diverting dollars in the early years from an affordable housing fund financed by the profits of the mortgage companies Fannie Mae and Freddie Mac. McCain's FHA provision is estimated to cost from $3 billion to $10 billion and would mean either cutting federal spending elsewhere or having the government borrow more. The first choice is to trim spending, a McCain aide said.

McCain's plan would provide relief to 200,000 to 400,000 homeowners. The aid would be available only to people who could show they were creditworthy when they got their original loan. The plan offers "every deserving American family or homeowner the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home," he said.

McCain prefers a more limited government role in dealing with the housing crisis, a position consistent with traditional GOP leanings. The other component of his plan would have the Justice Department to set up a task force to investigate possible wrongdoing in the mortgage industry. The department has been pursuing cases of fraud and other mortgage-related matters.

"In some cases, lenders and borrowers alike were caught up in the speculative frenzy that has harmed the housing market," the Arizona senator said. "And it is not the responsibility of the American public to spare them from the consequences of their own bad judgment."

Although most voters think the next president will have a "great deal" or "some" influence over housing prices, the reality is there is no quick fix.

"The odds of that are slim to none," said Cal Jillson, political science professor at Southern Methodist University. If the next president can make people more optimistic about the future, "the slow rebuilding of confidence will help to increase home values," he said.

An additional factor is the Federal Reserve, which presidents do not control. If the central bank were to raise interest rates to fend off inflation, the step would increase payments for homeowners whose loan rates are resetting higher. That, in turn, could push up foreclosures. "We are very exposed to interest rate risks and mortgage payment shocks in 2009," Wachter said.

Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

     In the natural ebb and flow of a free market economy there is recession and inflation, Bear markets and Bull markets, new jobs and layoffs, new businesses and failed businesses, the economic balance being found in the law of supply and demand. What can and should the next President do with the escalating home foreclosures in the recession America is now in? Both Barack Obama and John McCain are offering solutions to the housing problem in America that mostly reflect their political party's platform, Obama's solutions requiring "Big government", McCain's solutions involving "limited government". Both candidates fail to see the real culprit and source of the now busted "housing bubble", as the Federal Reserve Banks, the unconstitutional entity that controls the American dollar. In my opinion, nothing done by Obama or McCain in their administrations will drastically change our failing American economy as long as the Fed is allowed to be in existence, as Congressman Ron Paul has so passionately articulated for many years. In my opinion, John McCain's "limited government" approach will do more in the long run than Barack Obama's "Big Government" approach, as the free market economy will correct itself if the government leaves it alone, only intervening in the free market to prevent economic fraud or exploitation. Word to would be President Obama or President McCain, abolish the Fed along with your other housing crisis solutions!

tags: home foreclosures  economy  free enterprise  business  capitalism  the fed  takebackamerica  2008  politics  barack obama  john mccain  us  

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