CapitalistMarks

Sunrise? Sunset?

Posted on 04. Mar, 2009 by scott in economic daydreaming

My last blog was very negative . . . on the economy and the current administration.? I haven’t slept well for days.? Yet, Obama seems to have gotten the message, though I am pretty sure it wasn’t from me.

Today, for the first time, this administration has gotten something right.? And in a pretty big way too.?

How could this have happened so fast,?I have talked to niether Obama nor Giethner . . . ever, and that is one of their problems (at least in the vast wilderness of my own mind).

I?wrote about this jan 26, 2009 (see the good, the bad and the sad ).??I said then that the mortgage problem can be solved in a pretty straight forward way.? Lower interest rates and terms of existing loans.??I thought then that?40 year terms and interest rates at 4% or even lower would do the job.? A real good start on that problem anyway.

Today, Obama ’s team is making progress (not on the key unemployment problem but on the mortgage crisis that is almost as bad).? The thing they announced today may be a?bit complicated (hey, its the government doing this not Disney) but it is going to make a BIG difference in the mortgage mess.

Here is part of how it will work.? Say?a homeowner is underwater on their mortgage so they go to their?lender to redo the terms to make them manageable?(only occupiers … not investors).? Pretty good terms too.? They?can go as low as 2%? interest rate (yes, TWO PERCENT), and the term can be extended to 40 years.? I’d like to think that Giethner or Obama read my earlier blogs, but?I doubt it . . . they have been too busy lately bad-mouthing the economy and the lack of intelligence of the american consume.? That has helped with?further eroding confidence?( how Machiavellian of me to think they would do otherwise).? Maye that was okay to them since ‘they’ didn’t cause this mess –wait, wasn’t Obama a Senator for the last couple of years, wasn’t Giethner the President of the New York Federal Reserve Bank?

Depsite allthat rhetoric,?this is a huge step forward for them and it shows they are starting to think about the actual problems and not the ones they dreamt about years ago.??I think if we get just a couple more of these kind of intelligent and worthy deals thrown out there (I won’t get into the fact that this mortgage thing is going to cost upwards of $75 billion) then the gloom may start to diminish.? Maybe they will now move on to unemployment since they have ‘treated’ the smaller symtom first.

I?am still not ready to say that this is a beautiful sunrise of a new era of prosperity and fairness in the American economic-politicoal landscape (wasn’t that the main promise of Obama in his campaign?) but this makes me think that the sunset is not as definitive and certain as?I?believed just?yesterday.

A?good step one, Mr. President . . . stop traveling the circuit and come up with about three more just as effective?along with detailed plans of implementation.

Sure, in this new mortgage deal some big lenders?including freddie (I’m own a chunk of that?stock at about 10X the current price) and fannie (haven’t touched this one) are going to write down some big $$$ but the government is going to share the writedown (hence the cost).? The?40 years?? Yeah, that is going to hurt some balance sheets too, but remember that when times are good Americans don’t tend to stay in their homes for the long term.? This goes particularly for the younger, upwardly mobile (dare?I say ego driven) buyers that are always wanting something bigger and better — let me interject here that?I am in the same home?I bought when?I was 29 years old (my first) and have never seriously considered ‘moving on up’ like the Jefferson’s.

The short term impact of this new ‘plan’ is going to be very positive for the mortgage crisis, help a whole bunch of people stay in their homes, and help the economy as well.?

Long term?? Well, 40 years is a really long time . . .?I won’t be around then and most of you won’t be playing full-court then either.? As an aside,?I suggest you start now while you are young enough.?Basketball keeps?one thin and trim?and isn’t as expensive as golf or tennis or tanning.??Just a new pair of tenny-runners every two-three years.? Confesssion, though,?I gained 30 pounds when?I had to quit BBALL becaue of a bad back.??I still think?I could take?Obama in a game of horse and maybe one-on-one …? you reading this Mr. President?).?

This mortgage plan helps,BHO? thanks.

Another few moves like this and?I will be ready to declare a new sunrise! (plus, I’ll?spot you three letters in a game of H-O-R-S-E?or six points in the one-on-one, first to 12!)

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thanks for the flick photo goes to clairity

Tags: economy, mortgage crisis, obama