Add another first to Barack Obama’s record: he is the first U.S. president to make a personal appeal to the International Olympic Committee – and the first to be rejected. This flight of fancy occurred the day the Labor Department announced the highest unemployment rate in 26 years (9.8%.)
A tragically flawed portrait of a naive, un-ready president is coming into view. Due to his immense popularity with the news media and American people, he has falsely come to believe all he has to do is show up, engage in his charm offensive with eloquent words and he’ll get what he wants. The most urgent question raised by the failed Olympic bid was well phrased by Rep. Pete Hoeskstra, (R-MI) to the Wall Street Journal. “For this president, everything is a priority.” If everything is a priority, nothing is a priority.
To date 60% of the president’s $787 billion stimulus remains unspent. Where are the jobs? 15 million people are unemployed. Employers shed another 263,000 jobs in September pushing the unemployment rate to 9.8%, more than the 9% ceiling the administration swore unemployment wouldn’t exceed with passage of the stimulus.
Cash for clunkers, which was part of the stimulus, also crashed short of its goals. The $3 billion program was intended to boost American car sales and help resuscitate a dying GM and Chrysler. During the summer, roughly 700,000 cars were sold to buyers who received $4500 to purchase a new car and most buyers traded in clunkers for more fuel efficient foreign cars (Toyotas and Hondas). In September, car sales at GM plunged 45% from a year earlier and at Chrysler sank 42%. This program didn’t stimulate much but rather cannibalized future car sales from people who critics predicted would have probably purchased new cars anyway.
Another Obama initiative which has produced underwhelming results is the administration foreclosure prevention plan. In July, Senate Banking Committee Chairman Chris Dodd called the $75 billion foreclosure prevention program “disgraceful” because few borrowers received loan modifications to help stabilize the country’s collapsed housing market. In February, the administration boasted 4 million borrowers would get the help they needed to keep their homes. According to a September Treasury report, a meager 12% of eligible borrowers, 360,000, had begun loan modifications.
Despite the $700 billion in government funds banks have received, they’ve been stingy in consumer lending, particularly home loans. Wells Fargo has only initiated modifications to 11% of borrowers while Bank of America a mere 7% and besides the lack of foreclosure modifications, banks are also hoarding cash from well heeled, credit worthy borrowers seeking to refinance their home loans.
People shopping for or looking to refinance a jumbo loan exceeding $729,750 are generally out of luck. Banks argue there’s no secondary market for jumbos now so they have to keep the loans on their books. It is an inane policy for banks to impose more stringent standards on borrowers with good incomes and credit and eagerly offer lower rates and modifications to borrowers with uncertain income and shaky credit. This hefty down-payment requirement of 20%-40% on jumbo loans (depending on the amount) is another reason the housing market continues to languish.
The housing stabilization/foreclosure prevention program also missed the mark. It should have given incentives to banks to get borrowers out of home loans they should never have gotten in the first place. Studies have found most borrowers who receive modifications, default again on their loans within three to six months. Some of that $75 billion would have been better spent pushing the banks to refinance loans of borrowers who have an ability to pay their loans. After refinancing their home loans to lower rates, these borrowers would have some extra money to spend in their local economies. Putting a band aid on a gushing wound only leads to a festering mess later not a recovery.
Meanwhile, the president remains hell bent on force feeding Americans a $1 trillion healthcare bill against ever-increasing resistance.
When he flew to Copenhagen to sprinkle his signature razzle, dazzle pixie dust charm on the International Olympic Committee, Obama grossly over-estimated the power of his celebrity and diminished his credibility as President of the United States. Instead of jetting off to Copenhagen, appearing on the Late Show with David Letterman or conducting endless rounds of interviews and speeches on healthcare reform, the president should descend from the clouds of his
own popularity into the thick weeds of reality. It’s time for the president to settle into his job, go for gold here at home and abandon the role of salesman and celebrity in chief. Borrowing from his words: “the time is now and we can’t afford to wait any longer.”
13 responses so far
1 mlindroo // Oct 7, 2009 at 5:35 am
> Add another first to Barack Obama’s record:
> he is the first U.S. president to make a personal appeal to the
> International Olympic Committee – and the first to be rejected.
Crystal Wrights’ post is a total strawman, really.
The bottom line is that the heads of state of Brazil, Spain and Japan were all present at the IOC meeting, so can anyone please tell me why Obama should not have been there too?? Besides, losing the Olympics is hardly the end of the world. The Chicago bill stood and fell on its own merits, but at least Obama did his own (small) part by doing some cheerleading for his adopted hometown. Republicans only look childish and stupid when openly gloating because Chicago (an American city!) lost.
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As for unemployment and the economy, I’d urge patience. You don’t recover from the worst global recession since the early 1930s overnight.
MARCU$
2 midcon // Oct 7, 2009 at 7:30 am
The problem is that the federal government, beginning with the previous administration and continuing with this administration are operating on the margins. Consider the U.S. population – on one end of the bell curve you have the large and generally wealthy individuals and corporations. On the other end you have the poor, poorer, and poorest. Both of those groups are on the margins. In the middle you have the vast majority of American families. The ones for whom things are tight. The ones with jumbo loans because of the housing bubble. They have jobs. They pay their bills but things could be better. So they delay major purchases and have staycations. Most of the government efforts have been geared towards the margins (the tails of the bell curve) and not towards the middle. What do AIG and those who borrowed money that they could not afford to pay back have in common? Two things – they both were financial irresponsible AND the federal government is bailing them out. If you kept your financial affairs in order but are struggling, the government has no time, programs, or money for you.
3 sinz54 // Oct 7, 2009 at 9:10 am
mlindroo:
I agree 100%.
I’ve been saying the same thing myself.
4 balconesfault // Oct 7, 2009 at 10:24 am
If you kept your financial affairs in order but are struggling, the government has no time, programs, or money for you.
The dilemma that always plagues good governance.
If your neighbors house catches fire, you want the fire department to put it out – because that fire creates a risk to your house. And you don’t want the fire department to have to be debating whose fire they put out and whose they don’t – so you make fire protection a public good, and everyone pays for it.
But that’s not enough. Having faulty electrical wiring installed greatly increases the chance that someone’s home will burn down. So we now add building codes to mandate that someone can’t go cheap on the wiring in order to afford an extrawide garage. So in reality – a homeowner’s “freedom” to purchase a crappy wiring system has been taken away by the state for the general good.
How’s that tie in here? The middle is getting beaten up in no small part today because of excessive risk taking – in our financial sectors, and by homeowners who took out mortgages that had the potential to go upside down. The margins, as you put it. We clearly have a public interest in putting out the fires started by that risk taking – because they can spread to burn down our own lifes – but if we’re going to consider that part of the government role, then government also has to make sure the wiring isn’t faulty.
And in America over the last 8 years … in some ways, the last 28 years … the idea that electric codes hamper innovation and electric code inspectors are a blight on the free market has dominated much of the public debate. (Metaphorically, of course, for the overly-literal)
5 Apartment Glut Keeps Residential Real Estate ETF In Check | ETF Database // Oct 7, 2009 at 12:44 pm
[...] decline in the rental apartment market is directly related to the unemployment rate, which recently climbed to 9.8%. As layoffs mount, the unemployed become more likely to move in with friends or family. The current [...]
6 Oneon1isto // Oct 7, 2009 at 1:51 pm
I can respond to this entirely article by saying: unemployment is a trailing indicator and it takes a long time to right a multi-gajillion dollar ship from the brink of collapse.
And I love this suggestion: “Some of that $75 billion would have been better spent pushing the banks to refinance loans of borrowers who have an ability to pay their loans.”
I hope the author realizes that this was, in part, what TARP was for. To shore up balance sheets and unfreeze lending–which it did–but only when the banks were ready to start lending again. Before that they were tightened up and credit was dry. $75 extra billion advanced to “incentivize” banks would have been nothing.
You would’ve had to order them to loan money, but then that would be socialism, wouldn’t it? So we can’t have that either.
7 sinz54 // Oct 7, 2009 at 3:00 pm
Between the collapse of the housing market and the collapse of the derivatives market, some THIRTEEN TRILLION dollars of paper wealth disappeared. That’s more than the entire GDP of the United States for an entire year.
What we have today is a “wealth effect” in reverse: Americans look at how little their home is worth on today’s market, and they look at how much their 401(k) has shrunk. And they feel poorer. And they’re spending less money.
That’s going to take years to reverse.
We need patience.
Look past the unemployment numbers and concentrate on what REALLY drives an economy: MONEY.
8 balconesfault // Oct 7, 2009 at 6:45 pm
Look past the unemployment numbers and concentrate on what REALLY drives an economy: MONEY.
I don’t think money drives an economy – more like an essential lubricant.
And its worse if you run out – not only do you grind to a stop, but its not as simple as just pouring some in to get things going again. You may need your heads resurfaced, at best.
9 EscapeVelocity // Oct 7, 2009 at 9:30 pm
Actually building codes kept people out of affordable housing.
Regulated out of the market.
10 EscapeVelocity // Oct 7, 2009 at 9:32 pm
Then the Feds come in with the CRA program to “fix the market” and boom, housing crisis.
Which leads to financial crisis which is excascerbated by CDS gambling.
And the mess we’re in.
11 balconesfault // Oct 7, 2009 at 10:42 pm
I’ve got this vision in my head of escape walking around the house, unshaven, in bathrobe and slippers, muttering non-sequiters to the lamps
12 sinz54 // Oct 8, 2009 at 10:06 am
balconesfault:
Go compare the rate of increase in the money supply to the rate of economic growth.
They track fairly well.
The Fed has caused numerous recessions by tightening credit. Every time there has been a negative yield curve, there has followed an economic slowdown.
The Fed has stimulated the economy by pouring money into the system.
The growth of the money supply is by far the biggest factor in why the economy is the way it is.
13 EscapeVelocity // Oct 8, 2009 at 1:25 pm
Balconesfault, quit fantasizing about me.
Is that they kind of intellectual rigorous debate that David Frum is promoting around here?
LOL!
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