THE ECONOMY:

In housing, GOP saw opportunity

Dems were busy pushing stimulus, so foes moved on a plan for homeowners

Friday, Feb. 6, 2009 | 2 a.m.

Condos struggle in icy market

Real Estate in Crisis

Total decline in median price of homes could top 50 percent (2-2-2009)
Builder calls timeout as housing slide worsens (2-2-2009)
Experts say housing’s future is cloudy (1-30-2009)
Prediction: Las Vegas home-price decline will hit 52 percent (1-30-2009)
Foreclosure crisis also hitting renters hard (1-30-2009)
Index shows further decline in home prices (1-27-2009)

Washington — As this week’s Senate debate over economic recovery dealt with jobs and pork spending, Nevadans might have wondered what the government is doing about the elephant in the room — the housing crisis.

In few other states can the mortgage mess at the root of the economic meltdown be seen as clearly as in Nevada. The state has had the highest foreclosure rate in the nation for two years running. Half of Nevada’s homeowners are underwater on their mortgages, by one account — they owe more than their houses are worth.

President Barack Obama’s $900 billion American Recovery and Reinvestment Act pending in Congress is not focused on that — it’s supposed to be about jobs and cash: Lubricating the economic engine that has seized up so badly that more than 1 million jobs had been lost by the end of 2008. Nevada’s jobless rate is now 9.1 percent.

So what part of the Obama recovery plan will save housing?

According to the Democrats, not much. But they say that is by design.

Treasury Secretary Timothy Geithner is preparing a comprehensive housing fix separate from the stimulus package. To shore up housing, Geithner plans to tap into the $700 billion Wall Street rescue plan Congress passed last year. One idea is to help homeowners avoid foreclosure by rewriting their loans to provide more manageable monthly payments.

Democrats, aware Geithner’s plan is coming soon, have scarcely talked about housing this week, aside from the provision to give homebuyers a $7,500 tax credit. And their silence gave Republicans an opening.

Although Republicans also know that Geithner is working on a plan, they proposed one of their own as part of the Obama recovery legislation: The government would provide 4 percent, fixed-rate 30-year loans for any qualifying homeowner in the country.

The proposal gave Republicans a platform to talk about mortgage relief at a time when Democrats were not.

It was a stunning idea. Republicans helped stall mortgage relief last year, and their Senate pitchman, Nevada Republican Sen. John Ensign, single-handedly delayed last year’s housing bill as foreclosures mounted. (He was trying to attach a renewable energy tax break.)

Ensign said he has since changed his mind.

“It was easy, for a while, to blame irresponsible homeowners for taking risky loans and playing the system,” said Ensign, the only Nevadan to vote against a mortgage relief bill signed into law last year. “But the cancer caused by the housing crisis has spread to every aspect of our economy.”

The Republican plan went like this: For $300 billion, Republicans could rewrite 40 million mortgages, giving homeowners an average of an extra $450 a month walking around money. In Nevada, 477,020 homeowners could benefit.

The 4 percent home loans sounded too good to be true, and some economists said they would be. They warned the proposal would expose the government to great risk if home prices continue to fall, and would do little to curb the problem of excessive inventory.

Ultimately, a majority of senators were unconvinced. When the amendment came up for a vote on the Senate floor Thursday evening, it failed 35-62. Five Republicans joined Democrats in stopping the plan from advancing.

But for Republicans, the defeat hardly mattered. They went from the party that was simply opposed to the Obama plan to the one that turned a new leaf promoting mortgage relief.

“They gave us an opening,” one senior Republican aide in the Senate said. “In one week, we became a party about housing.”

Indeed, and Democrats realized they were being outmaneuvered in the court of public opinion. So they did join in passing a separate Republican amendment to double the tax credit for homebuyers, raising it to $15,000.

Democrats then paused, heeding the president’s request, sent in a letter this week to Majority Leader Harry Reid and other Senate leaders, from his director of the Office of Management and Budget, Peter Orszag. The director asked both parties to hold off on major housing measures until the Geithner plan could be completed: “In the coming days, the president and Secretary Geithner will be releasing a comprehensive proposal to strengthen and invigorate this part of the economy.”

Discussion: 16 comments so far…

By jfnance32

2/6/09 at 7:37 a.m.

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Suprise, suprise.....another unbalance one sided story by the very unprofessional Sun......Why not just change your name to Pravda?

The "stimulus" bill is not a stimulus at all.

It will do very little to help the economy.

The "tax cuts" are $500 cash welfare giveaways where the bluk of them are refundable tax credits going to those who pay zero income taxes. We tried this last year. All it did was make the retail sales go up a tiny bit and it effect quickly disappeared.

The bluk of the spending plan does not get spent until 2 years or more out.

Also, in Japan and with FDR, this type of spending does not nothing to the economy.

All this bill does is pile on the debt onto the backs of our children.
By harske

2/6/09 at 8:28 a.m.

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You ok nance? Sounds like you might be a little off from drinking the GOP Kool-Aid.

You really shouldn't confuse what we went through last fall as the same thing as is being proposed now. There's a huge difference between a 'bailout' and a 'stimulus' package. I think everyone learned a few lessons from the speed at which things were done in October and the results. But to say it did nothing is a misnomer. The entire idea of the 'bailout' last fall was to prop up the banking industry. And while loans to the masses are still a little slow in coming... the banking industry didn't altogether collapse, did it? So in the respect, the bailout did exactly what it was intended to do.

As usual, your Republican bias comes across as bitter, and you still have not put forth any different solutions to the problems you so eloquently seeth about. And if the Sun is such an unbalanced rag as you proclaim, why do we keep seeing your name in these posts? Why don't you just stop reading the Sun? Would probably be healthier for you.

So if you're so smart and can see that the current plan is a complete farce, what should we do? I would really like to hear YOUR plan for the economy. Please don't disappoint me and prove that you're one of these people that is great at tossing darts from the sidelines, but doesn't have any ideas on how to fix things?

What would you do if you were President for a day, jfnance32?

I'm sure if anything you have to say is revolutionary or groundbreaking, it will make it's way to the Hill and be incorporated, so here's your chance. Lay it on us...
By Future2012

2/6/09 at 8:36 a.m.

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Obama has pushed passage of the Stimulus II by taking to the TV airwaves and publishing an op-ed in The Washington Post.

On 2-5-2009, in a posh Williamsburg, Va. Hotel Obama proselytized to the national TV audience and Members at the House Democratic retreat venue.

At this partisan event Obama bashed Republican Senators for trying to improve the package with more jobs creation, faster influx of stimulus, relief for housing, and less pork spending. He wanted negotiations stopped and an immediate vote on the current Harry Reid package of $920 billion.

The fact that the Senate Republicans were doing the heavy lifting of Obama job of putting the Democratic package back on track with the parameters that Obama's economic team had originally set out.

The fact that Obama would rail so fiercely against those actual trying to meet his goals is extremely disheartening.

This does not bold well for comity in this nation.

Obama is ranting against the economy and is saying that our economy will not recover without an immediate borrow and spend package.

But Obama continues to lack a plan for housing which until it is fix nothing will work.

But the public is aware that the borrowing aspect can in fact negate the spending. Many Americans are not confident that the spending will turn the economy around.

Hence what Obama may be left with is a $920 billion (plus interest on borrowed money from China) social spending plan which if nobody believes in will not raise people's confidence as needed and intended.
By gqbossing

2/6/09 at 9:05 a.m.

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First off, the Sun is a democratic leaning company, they openly admit to it.

Not sure what the democrats can do though, it seems like both sides have analysis paralysis on what to do.

Really they just need to get themselves out of the way in every possible way and let the people who actually make this country work do our thing. Sticking us with mounds of debt, giving money to banks who aren't going to spend it becuase they are overreacting to their past bad decisions, and handing out checks to irresponsible people isn't going solve anything.

Human nature requires some suffering for us to buckle down and do what's necessary to move forward. we are in the suffering period right now, if you try to child proof it then some people won't learn the lesson of hard work and sacrifice because they will think that they will always be bailed out. We don't need the welfare system expanded from a segment of the population to the entire lot.

Really, we just need taxes lowered in income and incentives to buy things and then have the government get out of the way...
By vc

2/6/09 at 9:24 a.m.

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I am a democrat and i wanna give Ensign some credit on this one. I think this measure would have jolted this economy back to life as well as anything else. You drop a couple hundred dollars a month in my pocket and the that money is going to go right out to take care of things I can't normally afford. Like certain defered maintenance on my home, clothing purchases I have been putting off, I might even take in a show or eat out more often.
By neiman1

2/6/09 at 10:14 a.m.

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How can the stimulus plan help Nevada. Our President and the media singled out Las Vegas as an extravagance that will not be tolerated from Wells Fargo. How many other companies will now avoid Las Vegas because of these headlines. How many Nevada jobs has harry Reid and his pal Obama cost Nevada with this garbage.
By redferret

2/6/09 at 10:22 a.m.

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Neiman, you missed the point spectacularly on that issue.
1) Wells Fargo was a troubled bank in the hole. They have NO profits to spend on such a trip.
2) The money used on the trip was to be OUR money. NO ONE goes into this town to have fun on my dime except me and mine.
3) It wasn't that Vegas is expensive. Plenty of DOWNTOWN hotels or lesser strip hotels are plenty affordable to the likes of you and I. They were staying at the Wynn and Encore. They are the top two most expensive hotels right now. I'm sure there's no $10 buffet. I'm sure there's no $5/$10 tables of blackjack.

Do you see the issue? Not only were they using OUR money on a useless frill congratulating people for a horrible job done (one poster asked are they being congratulated for only losing 2 billion vs 3?), but they were doing it at the most ostentatious hotel/casino in the valley. Are you so partisan and blind that you can't see the issue with that? Seriously if you want to criticize Obama (jesus, he's only been in office less than a month), wait until it's something more fruitful and productive. Casting stones on this issue just looks dumb and bickering.
By jfnance32

2/6/09 at 10:24 a.m.

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That is true.

Nevada is ranked in the bottom of getting regular taxpayer money returned to it.

In this "stimulus" bill Nevada is again ranked in the bottom of getting its share.

Exactly,what does Reid do for Nevada?
By pmmart

2/6/09 at 10:37 a.m.

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A change that would really make a difference

[1] use the trillion dollars to lower interest rates on existing and future home mortgages to 3% on homes that are used as the principle residence by the homeowner ... IF these people opt to participate in the loan program.

[2]Those who do participate in the program would have their home treated as an investment subject to short and long term capitol gains meaning that the homes sale would have the increase in value treated as capitol gains income.

[3] IF .. The participating homeowner decides to use his homes equity for purchases such as boats, vacations or autos he would have to report the loan as capitol gains income and be taxed as such.

[4]Allow capitol gains borrowing for items such as incurred health costs and/or continuing education to be tax free.

Tons of cash would be instantly freed up and home ownership would be in the reach of most Americans ... given the rate that many home owners decide that they need to "keep up with the Jonses" the government would quickly start getting a R.O.I..
By Gordon

2/6/09 at 11:43 a.m.

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Wait and see how the markets react on Monday after this stimulus passes. This should tell you if business feels this is the right direction or not. I predict a huge rally in the markets once the details of the new stimulus are known for sure. Couple this with Geithner's rewrite of the second half of TARP, which is rumored to include favorable changes in mark to market rules. Financial shorts are already covering, they are foreseeing a huge rally.
By jfnance32

2/6/09 at 12:34 p.m.

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My two cents worth of throwing out predictions.....

I think the market has already factored in the "stimulus" money.

There might be a little bump up.

I expect the market to fall to 7,500-7,000 by the beginning of summer. It could fall to 6,500-6,000 in the fall.

Unemployment will continue its march toward 10% and higher.

Late next year--2010, it might stablized and stop falling.

2011 we might see slight growth of 1-2%.

2012 we will see signs of inflation and low growth----stagflation. Obama will have generated over 5 to 6 trillion in new government debt by then.
By johnevegas

2/6/09 at 3:36 p.m.

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"Suprise, suprise.....another unbalance one sided story..."

Suprise, suprise.....another unbalanced one-sided ultra partisan post from Jim Nance. Must be Friday.
By perry161492

2/6/09 at 10:24 p.m.

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it wil not work people will save i know i would
By jfnance32

2/6/09 at 10:50 p.m.

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Even Johnevegas does not defend the unbalanced nature of the "newstory" by the Sun.
By johnevegas

2/7/09 at 4:22 a.m.

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Nothing to defend. I agree with the story. Frankly, I find the ultra-partisan nature of the GOP since the election to be amazing. Your side did not hear the message. Clearly.

It's like the perfect reflection of how you act on this board. I don't think you have acknowledged one single point I have ever made. Maybe facts are boring for the Right. I know they are certainly inconvenient for you, or hateful.
By BTP

2/9/09 at 2:28 p.m.

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jfnance,Why are you so worried about the backs of our children now after all the billons and billions of dollars China has lent us for the boondoggle called Iraq,Wait till the real truth comes out to what really has happened over there.Right now your party has just lost all of your credibilty when the truth comes out it won't be worth a plug nickle!The conserative agenda in america has been atotal and dismal failure and will be relagated to the scrap heap of history!!