SENATE REPUBLICAN LEADER Mitch McConnell on Monday demanded an amendment to the mammoth economic stimulus package to give government-backed, low-interest loans to homeownersa revision that he says will both increase the demand for houses and boost the average household income.
"We believe that a stimulus bill must fix the main problem first and that's housing," McConnell told reporters Monday in introducing a plan to offer fixed mortgages of 4 percent to "any credit-worthy borrower." According to McConnell, his plan would allow the average family to see its monthly mortgage payment drop by $466 a month, or $5,600 a year. He said in a radio address Saturday that over the life of a 30-year loan, that's a savings of $167,760.
The House passed an $819 billion version of Obama's stimulus proposal last week and the Senate version being debated this week is even larger$900 billion. But most troubling to Republicansand even some Democratsis that no money is allocated in the proposal to go directly toward foreclosure relief and the housing crisis, aside from a $7,500 tax credit for first-time home buyers.
Lowered-mortgage payments would put more disposable income into the hands of recession-battered households, McConnell said on the same day a staggering report showed consumer spending fell for a record sixth straight month in December.
Yes, we want the same sweetheart deal that Chris Dodd got. It's only fair. And it bristles of poetic justice! We live under the same heavens. I want a 4% mortgage, and then I'll shut up about this treacherous bailout. Because let's look at this another way. Although US bankers are wailing hysterically that this kind of financial meltdown has never been seen before, the truth is that Japan went through something almost exactly like it back in the 90’s when their own real estate bubble burst.
The crash for them took place in ‘90-91 and didn’t really affect the Japanese until 1992. That was when things got feisty. But unlike our own leadership, the Japanese government left the economy to sort itself out, and some say that it originally made the situation worse by planning to adopt austerity measures and they announced these measures, like tax increases, 18 months in advance.
Eventually, there were some changes in government and some kind of Keynesian economics wizard who started to hold banks accountable for what is called adverse selection. As I understand it, adverse selection occurs when bankers hold onto their bad assets, like bad mortgage tranches, for example, in the hopes that they will be worth something someday, while they sell off all of their good assets for cash they need in order to do regular backing business like lending and borrowing. When Japanese banks were finally forced to eat their bad stuff, the economy turned around.