Blogs

Obama's Mortgage Rescue Plan: Easier To Judge the Pitch than the Policy

| Wed Feb. 18, 2009 1:25 PM EST

On Wednesday morning in Phoenix, President Barack Obama unveiled his $75 billion (and maybe more) home mortgage crisis plan. The package is a grab-bag of provisions. The main ones aim to refinance mortgages for 4 to 5 million "responsible homeowners," to set up a "stability initiative" to help 3 to 4 million "at-risk homeowners," and to reduce overall mortgage rates by committing more money to Fannie Mae and Freddie Mac. Obama also noted his support for changing bankruptcy rules so judges can lower home mortgages for borrowers in bankruptcy. Overall, the details are, at this point, vague. And there's no telling if any of this will work--and arrest a possible death spiral in the real estate market. Policy wonks and partisans will argue over the various components. But what was apparent was Obama's skill as an effective policy pitchman.

The speech hit several important themes for Obama: community, populism, and responsibility.

Advertise on MotherJones.com

The 6th Street Viaduct

| Wed Feb. 18, 2009 1:07 PM EST
The 6th Street Viaduct in Los Angeles has been slowly crumbling for years thanks to defects in the cement originally used to build it, and the city recently unveiled its plans for a replacement:

After a series of public meetings over the last two years, city engineers decided that replacing the bridge was the only viable option....A model of the proposed span shows two rectangular towers in the middle of the bridge, with cables down both sides.

....The cost of replacing the viaduct with the proposed structure is estimated to be about $345 million, officials said.

This is just idle musing, but I wonder why this bridge costs so much?  The original structure cost $2.3 million, which comes to about $36 million in today's dollars.  In real terms, then, the bridge costs ten times as much today as it did in 1932.

Why?  Labor costs are proportionately higher today, of course.  The old bridge has to be built around and then demolished.  LA is built up and we can't just build a cement factory on site, the way we did 75 years ago.  Earthquake standards and general permitting requirements are more stringent.

On the other hand, we also have 75 years of technology progression.  Labor costs may be higher, but we use less total labor and more machinery these days.  And computers help with most of the design work.

Like I said, just idle musing.  But it sure seems odd that after 75 years of fantastic technological progress, it not only costs more to build a bridge than it used to, but it costs ten times more.  That's a lot of dough.  I just hope it's shovel ready.

Supreme Court May Hear Mercury In Tuna Case

| Wed Feb. 18, 2009 1:02 PM EST
Last fall, we published a story about a woman named Deborah Fellner who had sued Chicken of the Sea alleging that she had gotten mercury poisoning from eating the company's canned albacore tuna. Tuna companies have known at least since the 1970s that canned tuna can contain high levels of mercury, which can cause neurological problems that resemble Parkinson's disease and other ailments. (Fellner's hair fell out, among other things.) Yet a New Jersey federal court initially threw out her case thanks to help from the Bush FDA. At the request of the tuna industry in another lawsuit, the FDA had claimed that such lawsuits were "preempted" by federal law because it was already doing such a good job of regulating tuna.  A judge agreed, and using that decision, Chicken of the Sea claimed that Fellner's lawsuit was likewise trumped by federal regulators, largely because they had posting a warning about eating mercury in fish on the FDA website. It was a pretty flimsy argument, and eventually, an appeals court reversed in favor of Fellner. Her lawsuit has been proceeding ever since. And now it looks like it might go all the way to the U.S. Supreme Court.

Comparative Effectiveness

| Wed Feb. 18, 2009 12:33 PM EST
Via Ezra, medblogger KevinMD writes in favor of federal funding for comparative effectiveness research:

Physicians need an authoritative source of unbiased data, untainted by the influence of drug companies and device manufacturers....The only way to tackle such a huge project is with money, and indeed, the Obama administration recognizes this fact by including $1.1 billion in comparative effectiveness research in the economic stimulus package.

Clearly, the pharmaceutical and device industry would like both the public and physicians to continue to assume that "newer means better." Not asking these questions allows them to continue promoting profit-making brand-name treatments.

Their motives in attempting to quash comparative effectiveness research could not be more obvious.

Indeed, their motives are obvious: They know perfectly well that a lot of their newest and priciest treatments aren't any better than the stuff going off patent next year, and they'd just as soon no one knew that fact.  But I'd like to know, and I'm positively delighted to kick in my share of that $1.1 billion to find out.  Anyone who's not a pharmaceutical executive ought to be pretty happy about it too.  Ezra has more on how the whole scam works.

Bobby Jindal Is Scheming

| Wed Feb. 18, 2009 12:23 PM EST
Is Governor Bobby Jindal (R-LA) really going to turn down the roughly $3.8 billion in stimulus funds slated for Louisiana, as he's threatening? Of course not. Louisiana is a poor state with growing unemployment. It is experiencing a budget shortfall. If Jindal turns down the money and the economies in the other 49 states creep upward over the next 12-18 months, Jindal will have committed career suicide.

So what's with his posturing? I would posit that he's simply a crafty and ambitious politician. Jindal is building an reputation as the most conservative member of the GOP's presidential wannabe crowd, which squabbles over who is the most right-wing every time it hits the Iowa campaign circuit. Talking tough about the stimulus nets him press now; quietly taking the money a few weeks from now will almost certainly go unnoticed.

GOP Meltdown Watch

| Wed Feb. 18, 2009 12:15 PM EST
The Republican leader in the California state senate is one of only two GOP senators who's agreed to back a budget compromise that includes both spending cuts and tax increases.  Last night, Sen. Mark Leno (D-San Francisco) taunted the holdouts, telling them, "You ought to follow your leader or choose a new one."  It turns out they agreed:

Around 11 p.m., a group of GOP senators, unhappy with the higher taxes that Senate leader Dave Cogdill of Modesto agreed to as part of a deal with the governor and Democrats, voted to replace him in a private caucus meeting in Cogdill's office.

They chose Sen. Dennis Hollingsworth, a staunchly antitax lawmaker from Murrieta, as their new leader.

....Hollingsworth said he does not want to see a tax increase passed, but he offered no plan for resolving the budget crisis.

So it's back to square one with the flat earthers determined to wreck the state.  A friend of mine emailed to say that my post the other day comparing California Republicans to lemmings and neanderthals was unfair to both lemmings and neanderthals, and I guess he had a point.  So what do we compare them to now?

Advertise on MotherJones.com

Homeowner Bailout

| Wed Feb. 18, 2009 12:03 PM EST
President Obama unveiled his homeowner bailout plan today.  The first provision is aimed at motivating mortgage servicers to offer underwater homeowners improved loan terms:

Servicers can receive an up-front payment of $1,000 for each eligible loan modification that meets certain criteria. The government said it would pay servicers $500 and mortgage investors $1,500 if at-risk loans are modified before borrowers fall behind. The government said it would also help pay down the principal of certain mortgages by up to $1,000 a year for up to five years if the borrower doesn't miss any payments.

Hmmm.  Loan servicers already have an incentive to rework loans that would otherwise go into default, and for the most part they aren't doing it.  Will a couple thousand dollars change their internal calculus?  Offhand, it doesn't sound like enough to really make a difference — though another provision of Obama's plan adds a stick to the carrot, by allowing bankruptcy judges to unilaterally alter mortgage terms.  So it's possible that the carrot and the stick together will have a noticeable impact.

The second major part of the program is aimed at lowering interest rates on underwater loans:

Finance companies cannot currently refinance a loan if the homeowner owes more than 80 percent of the home's value. But under the plan, Fannie and Freddie — which were taken over by the government last year — would be able to refinance a mortgage if it does not exceed 105 percent of the current value of the property. For example, if the value of the borrower's property is $200,000, but the homeowner owes $210,000, he or she could still qualify for the program.

This sounds promising.  If the interest rate reductions are significant, it could provide some serious help to homeowners.  It will also help arrest the slide in home prices, which might be a worthwhile goal at this point.  It's true that house prices are still too high and need to fall further, but Obama's program most likely won't have a serious effect for another six months at least, and by that time we might be at risk of house prices overshooting on their way down.  A program that pushes against that tide could end up being a good countercyclical tool.

Chamber of Commerce Secretly Trying to Take Down Labor Appointee

| Wed Feb. 18, 2009 11:56 AM EST

Ah, the use of front groups by the Big Business lobby. Always so much fun. Here's the latest example, spotted by the Center for Responsive Politics' Public Integrity's blog, PaperTrail, when it investigated this online advertisement against Labor Secretary-designate Hilda Solis:

 

Clicking on the ad takes you to a petition against Rep. Solis' nomination, which is hosted on the website of "Americans for Job Security." While it’s hard to find anyone these days who would be against job security, the claim that Solis is “anti-worker” doesn't seem to jibe with endorsements from the AFL-CIO, SEIU, and other unions.

 

As it turns out, Americans for Job Security is actually a spin-off of the U.S. Chamber of Commerce, the nation's most robust business affiliation that has traditionally worked to elect conservative, pro-business politicians and judges is one of the strongest anti-union voices in American politics. The group also lobbied heavily against the Employee Free Choice Act legislation that Solis co-sponsored in 2007 as a member of Congress.

The Chamber of Commerce also says it is committed to "address[ing] energy, security, and climate change challenges," but in reality, it orchestrates a campaign of misinformation on the issue of climate change that seeks to kill the most drastic (and likely most necessary) legislation in favor of business-friendly alternatives. I don't doubt that the Chamber does a lot of good work, particularly for small businesses. But on issues like labor and global warming, it is part of the problem.

Report: FDA Ignores Safety Regs, Risks Lives

| Wed Feb. 18, 2009 11:36 AM EST

From last year's outbreak of salmonella-tainted tomatoes, to an internal analysis (PDF) warning the agency can't adequately regulate new medical devices or protect the safety of the nation's food supply, all the bad publicity the Food and Drug Administration has earned in the last two years revealed an agency plagued by lack of funding and incompetence.

A report released Wednesday by Project on Government Oversight, a Washington-based watchdog group, adds another item to the list of bad ink for the FDA, this one a product of downright negligence.

Bailing Out Detroit

| Wed Feb. 18, 2009 12:46 AM EST
The latest from Detroit:

The price tag for bailing out General Motors and Chrysler jumped by another $14 billion Tuesday, to $39 billion, with the two automakers saying they would need the additional aid from the federal government to remain solvent.

....The deteriorating finances of the two companies present the Obama administration with two options, neither of them appealing  It can provide the money in the hopes that the companies will stabilize, and no longer have to keep pushing workers into a growing pool of people without jobs....But if the federal government balks at the automakers’ requests, that would mean the two companies probably would have no choice but to file for bankruptcy protection, because they are losing hundreds of millions of dollars each month.

Hell's bells.  What to do?  I mean, does anyone believe this is the end of the bailout requests?  I certainly don't, and I doubt anyone else does either.  On the other hand, the alternative is allowing GM and Chrysler to fail in the middle of a recession.  Nobody wants that.  But on the third hand, even if we bail them out, what are the odds that they can survive in the long term anyway?

In the end, I suppose we'll continue bailing.  But this whole process shows up one of the big pitfalls of government action like this.  My own guess — and this is obviously just a personal hunch — is that while GM is at least arguably salvagable, Chrysler is a hopeless basket case.  So if we're going to do anything, we should probably bail out GM but let Chrysler go under.  That would save the taxpayers some money and reduce overcapacity in the auto industry at the same time. Unfortunately, politics being what it is, the Obama administration probably feels like they can't pick winners and losers and needs to treat them both equally.

This is almost certainly dumb, but it's what's most likely going to happen.  So the American public will end up pumping $10 or $20 billion into Chrysler in order to help it become, basically, the North American subsidiary of Fiat — a partnership that does the U.S. auto industry little good and will itself almost certainly crumble and fail before long in any case.  What a mess.