We break away from our regularly scheduled program on the markets…as we are back to…”they are never going down again!” Actually, we told you we would bounce but as usual, this is more than a bounce as Central Banks around the globe, in a coordinated effort, have juiced markets again. Very simply, they have not lost the ability to goose the markets, even out of freefall.
Mel Watt is the newly appointed Federal Housing Finance Agency Director. Here is a little backround on Mr.Watt. In the past, he pushed government programs to help welfare recipients buy homes. He also was a part of the fabulous programs allowing borrowers with poor credit to buy homes with no down payment. We know what happened from there. Of course, no blame! The financial system was crushed when millions of bad borrowers defaulted on their loans. We have blamed the Fed, the borrowers, the financial institutions and the creators of these assinine programs.
In 2002, Watt teamed up with Freddie Mac and Fannie Mae, Bank of America, BB&T, and UJAMMA Inc., to announce Pathways to Homeownership, a pilot initiative designed to give home loans to welfare recipients.
Fast forward to today. Mr. Watt, with his infinite wisdom and clear lack of memory, now has his agency working with Fannie and Freddie again…and to do what? In order “TO INCREASE ACCESS FOR CREDIT-WORTHY BUT LOWER-WEALTH BORROWERS” his agency is going “TO DEVELOP SENSIBLE AND RESPONSIBLE GUIDELINES FOR MORTGAGES WITH LOAN-TO-VALUE- RATIOS BETWEEN 95 AND 97%!” Yes, Mr. Watt is back to putting the taxpayer on the line again for the same type of loans that almost destroyed the financial system to the same type of borrowers…and all this AFTER HOUSING PRICES HAVE RECOVERED because of the maniacal Fed. No worries…Fannie and Freddie were only rescued to the tune of $188 billion. No worries, housing prices will never fall again as the Fed will print money forever. No worries that just a 3-5% decline on a loan would again put the mortgage holder under water.
We have told you forever that if bad behavior and bad policy are not punished, they will be repeated. Most politicians know it is not their money on the line…so who gives a crap? You are on notice. If this goes through, you will be hearing about another housing/loan disaster going forward. We will remember Mr. Watt. We doubt anyone else will.