is in the Air
Research for Online Investors
There have been rumors around the market the White
House was working on a “grand refinancing” plan to put money in voter’s pockets this spring. The idea is to allow ANYONE who is current on their mortgage payments for the last
six months to refinance at today’s lower interest rates.
Ezra Klein wrote about the “plan” yesterday in the
Washington Post. His title tells it all “The
biggest thing Obama can do without Congress.” It fits nicely with
President Obama’s campaign message of a “do nothing” congress.
Columbia economist Christopher Mayer and Glenn
Hubbard, dean of the Business School, authored a paper last fall. They estimated up to 30 million
homeowners could benefit from refinancing their homes. Many are not
able to refinance because they are “upside down.” This popular term has been applied to situations where the
home has fallen in value below the amount of the loan. Others may not
be able to refinance because of enhanced and more difficult loan origination credit
Many self-employed homeowners have “low-doc” loans
that cannot be refinanced under today’s guidelines. Mayer and Hubbard
estimate mortgage payments would fall by about $70 billion. This would
leave more money in homeowner’s pockets and help spur the economy.
Mayer and Hubbard point out the economic benefits
of the program and the costs, comparing it to a “long term tax cut.” The
plan would not cost the government anything, because “Bondholders are paying the bulk of the cost of this
Klein points out the President can do this without
congress agreeing. There is one small problem. Fannie Mae and Freddie Mac are overseen by the Federal Housing Finance Authority
(FHFA). The FHFA is headed by Edward DeMarco. Mr. DeMarco is a career bureaucrat who became the acting director after James
Lockhart (Bush’s appointee) resigned early in Obama’s term.
President Obama didn’t nominate anyone to head the
FHFA until late in 2010, after the elections. Senate Republican have
blocked the confirmation. Acting Director DeMarco won’t play ball with
Obama. He has taken a conservative management approach and opposes many
of Obama’s efforts that involve Fannie and Freddie.
Klein proposes that President Obama make a
“recess” appointment to fill the FHFA Director’s job with a “friendlier” director. Have the new director approve the program, write the rules and announce the program
during his State of the Union address.
The plan fits nicely for Obama. He can go around the congress, painting them as not addressing the middle class
voter’s needs and get back on the campaign trail with his “We can’t wait on Congress”
Evidence that ‘Change is in the Air’ hit yesterday
when Michael Williams announced his resignation as CEO of Fannie Mae. It is almost too good an opportunity for Obama to act. Watch for a “recess” appointment in the next few days, on any break congress
takes. The State of the Union address is scheduled for Tuesday
January 24. What can congress do, impeach
Pepsi Beverages announced the settlement a “racial
bias” case with the Equal Employment Opportunity Commission (EEOC) for $3.1 million dollars. USA Today reports the company made the mistake of using criminal background checks to screen
job applicants. Using criminal background checks was deemed
discriminatory ‘if it is not relevant for the job.’ Ok…what is
The market looked to go lower this morning but has
good support after the strong advance yesterday. Absent any bad
headlines, we are consolidating the gains on the market’s push through resistance at 1285. We have been busy in the market today.
Editor’s note: If you bought our SwingTrader recommendation of TZA here are our
results: 01/10 bought at $24.00 01/11 sold at $24.05 for no
This trade was ‘feeling’ the market for a possible
breakdown. We closed with no damage and are looking for long plays to go
with the trend higher.
Socialism in general has a record of failure so blatant that
only an intellectual could ignore or evade it.—Thomas Sowell
The information presented in this newsletter is based on generally available news releases, corporate filings,
current events, interviews and the editor’s opinions. It may contain
errors and you should not make investment decisions based solely on what you believe you have read
here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your
grandmothers! The editor may or may not have a position in any
securities discussed. The editor may have held a position in a
security earlier, or in the future.
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