More Mortgage Bailouts

The federal government continues to throw good money after bad, with a fresh $600m commitment to unemployed people in five states that are behind on their mortgages.

"The Obama administration plans to send $600 million to help unemployed homeowners avoid foreclosure in five states.

The Treasury Department says mortgage-assistance proposals submitted by North Carolina, Ohio, Oregon, Rhode Island and South Carolina received approval. The states estimate their efforts could help up to 50,000 homeowners.

The administration is directing $2.1 billion from its existing $75 billion mortgage assistance program to a total of 10 states. Each state designed its own plan.

Treasury approved money in June for Arizona, California, Florida, Michigan and Nevada."

It's unclear why the federal money is only designated for 10 states. Surely the housing market has also fallen in states other than those identified above. It can't simply be that the remaining 40 states never applied for assistance; if there's free money out there, people will find it. It's actually more likely that the government is playing politics, and using federal money to win over voters in key states.

The key question though is whether this bailout is a proper use of taxpayer money. The housing market is falling because of oversupply and because prices got out of control. Letting the market fix the excesses that were created in years past is the healthy and normal way to fix the problem, without any unnecessary government intervention.

Unemployed workers are already given generous benefits for being idle, in many cases encouraging them to remain idle far beyond when they would otherwise be able to return to the work force.

Let's not give them free money for the purpose of keeping them in a house that in many cases they should be looking to sell in order to get out of a burdensome mortgage liability.

Taxpayer Bailout of State Pension Plans?

A recent CNN/Money article suggests that state pension plans will need a bailout from the federal government in the coming years.

"This is a problem of monumental proportion," said Rauh, an assistant professor of finance at the Kellogg School of Management. "Given that we see the same issue in many states, the total size of a federal rescue plan could exceed the seriousness of the recent economic crisis and potentially cost more than $1 trillion total."

Let's see if I have this right. States are either unable or unwilling to raise enough taxes from their own residents to make their pension plans solvent. So, instead, they may want the federal government to tax those same people, and then transfer the money back to the states?

Huh?

Here's a better idea. How about the states that have massive pension shortfalls simply reduce the defined benefits that have been promised to state workers to a degree that the pension plans are, voila, no longer insolvent?

Annual compensation (i.e., salaries and benefits) for workers at the federal and state level are already significantly higher than pay for workers doing similar jobs within the private sector.

Simply put, there is simply no plausible reason that the fatcats working for government should be bailed out at the expense of the rest of us.

Taxpayer Losses Roll In From the Bailout

The US Government is beginning to acknowledge what most people have known for the past year - the 2009 bailouts were the equivalent of flushing money down the toilet.

"The Treasury Department said Monday it will lose $1.6 billion on a loan made to Chrysler in early 2009. Taxpayer losses from bailing out Chrysler and General Motors are expected to rise as high as $34 billion, congressional auditors have said.

Treasury said Monday that Chrysler repaid $1.9 billion of a $4 billion loan, which was extended before the company filed for Chapter 11. The government hopes to get another $500 million from the company that emerged from bankruptcy, Chrysler Group LLC."

The 2009 bailouts of Chrysler and GM were always about protecting union jobs, union contracts and union benefits. Nothing more, nothing less.

Making below-market loans to loss-making companies with astronomical labor costs and that have made little effort to reign those same costs was never a sound idea, and had failure written all over it from the beginning.

Unfortunately the loss reported here is nothing compared to what taxpayers will see from the amounts extended to Fannie Mae, Freddie Mac and the rest.

This titanic waste of taxpayer money is yet another in the long list of reasons that the politicians that voted for the 2009 federal bailouts, Democrat or Republican, should be tossed out of office as soon as they stand for reelection.

GM returns all of its bailout money? Not so fast...

General Motors has made the news recently with its much-hyped announcement that it has repaid $8.1 billion of "emergency" loans extended to it last year by the US and Canadian governments.

The hometown Detroit Free Press was front and center in their cheerleading:

"You have to wonder what those who opposed the GM bailout think about the loan repayment. Some had predicted that taxpayers would never see a dime of the money that was loaned to the struggling automaker. The alternative would have been to let the domestic auto industry crash and burn, taking along with it tens of thousands of jobs at a time when our economy is already reeling.

It’s way too early for those who favored government aid for GM to break out in loud chants of “I told you so,” but if the good news out of GM continues, they might want to start thinking about warming up their vocal cords."

Implicit in GM's aggressive announcements is that it basically is now free and clear of all messy financial entanglements with the federal government.

However, as the website SayEducate points out, nothing could be further from the truth.

"Some $52 billion in additional money was invested in GM by American and Canadian taxpayers who now own approximately 60 and 12 percent of the company respectively. Those monies can only be recovered if and when GM begins to sell stock, something that doesn’t look like will happen before 2011."

So two points can be gleaned from all this noise:

1) GM received over $60 billion in money over a year ago, and has managed to repay a measly $8 billion of that amount, probably with cash that it did not use but rather had parked in a bank account for the very purpose of making this type of PR splash.

2) Taxpayers hoping to reclaim the other $52 billion used to acquire GM shares have to wait for a public offering of GM shares, which should follow the period in which GM has executed a complete turn-around, repudiated its self-immolating contract with UAW, begins to produce cars at a profit that Americans wish to purchase and is valued at at least $52 billion. So in other words, we can kiss that money goodbye.