Real Estate

Surprise: NBC finally found a business it likes - even a business decision it likes: companies that help homeowners who decide to walk away from their mortgages.

"New figures show foreclosures in the U.S. are up about 35-percent from a year ago," Matt Lauer kicked off an April 20 segment of "Today" that encouraged homeowners - even those financially comfortable - to simply walk away. "And a growing reason why are people who simply choose to walk away from their mortgage even when they can afford it."

"Experian, the credit-monitoring service, says 588,000 borrowers - or 18-percent of those who have defaulted on their mortgages in the past year - did it for strategic reasons and not because they're broke," NBC's George Lewis reported. "It's called a strategic default, walking away from a home and enduring foreclosure out of frustration with a bad investment."

On the scene with the Schreur family in Folsom, California, Mr. Schreur acknowledged in an interview that although his family was not in any financial distress, a sharp decline in house value incited the family to default, as any other option "made no sense."   

The Obama administration is trying out a second big-government remedy for people facing foreclosure, but NBC's "Today" failed to mention criticism of the initial program or provide any free-market solutions.  

The White House has now tapped $14 billion in TARP funds to expand the administration's existing mortgage assistance program. 

Matt Lauer introduced the "Today" show March 29 discussion of the program saying: "New help for millions of homeowners who are facing foreclosure. The Obama administration is rolling out new incentives to the federal mortgage relief program - so what's different this time?"

"If you're unemployed, this is going to give you an ability to have your monthly payments lowered for three months, maybe even six months," CNBC's Sharon Epperson told Lauer, before noting the requirements and assistance for those "underwater." 

"He dug into the idiocy and negligence that produced the worst financial crisis since the Great Depression," Steve Kroft opened a segment of the March 14 CBS "60 Minutes," featuring author Michael Lewis' latest work - "The Big Short: Inside the Doomsday Machine."

If Lewis "dug into the idiocy and negligence," he did so selectively - or that's what viewers could conclude from the long "60 Minutes" report, which concerned itself with how "some of Wall Street's smartest minds managed to destroy $1.75 trillion of wealth in the sub-prime mortgage markets." Somehow, in a 24-minute report about the sub-prime mortgage meltdown, nobody ever said where all the bad loans originated.

Lewis told Kroft that the financial crisis was "a story of mass delusion."

"How can they not look at the numbers?" Kroft asked. "How can Wall Street be selling all these, buying all of these mortgages and repackaging them and not realizing they are not very good mortgages?"

The adverb that begins with a "U" made yet another appearance yesterday in connection with an economic report. The related noun that begins with an "S" came along for the ride.

The news concerned sales of new homes. They fell "Unexpectedly" to their lowest level since 1963, when the U.S population was about 40% lower. The decline was a "Surprise" to economists, who had predicted an increase.

It continues to fascinate that the "Unexpected" news that came as a "Surprise" to economists during a large portion of the Bush 43 administration more often than not was to the upside, while the trail of "Unexpected Surprises" during the current administration is littered with downers.

Ahead of the news, the Associated Press appeared ready to play up what it thought would be good news, and then exiled its reports to remote corners when things didn't go as expected.

In a Thursday afternoon story on the small rise in the Case Schiller home price index, the AP's Adrian Sanz was talking of recovery, while inventing a new economic concept (bold is mine):

Last Friday, New London, Connecticut's newspaper The Day carried the first bit of news in years that might be construed as positive about the city's Fort Trumbull area, part of which became the subject of the infamous Kelo v. New London Supreme Court decision in June 2005. Twenty-four hours later, further detail also carried at the Day showed that the "good news" is really a cruel joke on homeowners who fought for the right to keep their properties.

The Kelo decision turned the clear language in the U.S. Constitution's Fifth Amendment on its head by affirming the right of the city to take private property from individual homeowners for a "public purpose" (not a specific "public use" as the Amendment requires).

The city convinced the Supreme Court that it had "a carefully considered development plan." The trouble was when that plan met the real world during the three-plus years after the July 2006 final settlement between the city, the State of Connecticut, and final eminent-domain holdouts Susette Kelo and Mike Cristofaro, no developer wanted to get involved. Kelo's house (pictured above via the New York Times) was moved to a separate site and serves as a monument to her and others' heroic efforts.

Despite the hard feelings all around, one can see how Thursday's news covered in Friday's Day indicating a bit of movement in a moribund situation might have been cause for limited cheer:

The Obama administration's Home Affordable Modification Program (known as "HAMP" to lenders and services, and MHA, or "Making Home Affordable" to the general public) is "failing."

I only learned this because I looked at the Associated Press's feeds on Christmas evening and saw this headline -- "No consequences for lying borrowers."

In an item time-stamped December 25, AP national business columnist Rachel Beck (note: not a reporter) used language that would ordinarily cause many in the press to characterize such a person as a hard-hearted meanie to describe the results of this core Obama initiative this far:

No consequences for lying borrowers

The government shouldn't reward liars. But that's the effect of changes to the Obama administration's failing program to help homeowners modify their mortgages.

On Thursday, the Treasury Department issued a press release, called "Update on Status of Support for Housing Programs." Its fourth paragraph reads as follows:

At the time the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth. Treasury is now amending the PSPAs to allow the cap on Treasury's funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three year period, the remaining commitment will then be fully available to be drawn per the terms of the agreements.

Translation: No matter how badly things further deteriorate at these former government sponsored enterprises, both of which since last year in essence have become government-controlled enterprises, Uncle Sam (i.e., current and future generations of taxpayers) will cover their losses.

Here is how three different news outlets headlined this Treasury/Obama administration move:

If there's a Ground Zero for America's foreclosure mess outside of much of California and metro Las Vegas, it's probably Cleveland, the Northeast Ohio city known in most of the rest of the state as the Mistake on the Lake.

The Cleveland Plain Dealer's Mark Gillespie got out from behind his desk, committed some good old-fashioned journalism, and went looking for the mistakes that exacerbated the town's breathtaking home foreclosure rate. Lo and behold, he found that city government itself contributed mightily and extraordinarily negligently to the debacle. Go far enough into Gillespie's report, and you will also find an implicit admission that the Community Reinvestment Act (CRA) also played a pivotal role (bold is mine):

How Cleveland aggravated its foreclosure crisis

The city of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford, a Plain Dealer investigation has found.

On yesterday's CNN Newsroom, anchor Kyra Phillips shifted to "Bad Boys" mode:

Lenders, lenders -- what you gonna do when they come for you? Call it an early Christmas present for people on the edge of losing their homes. The Obama administration cracking down on mortgage companies.

We'll tell you about it.

After the break:

PHILLIPS: Well, from your health (ph) to your home, the foreclosure crisis shows no signs of letting up, so the Obama administration is trying to fight back.

It's a development that I wouldn't wish on anybody, but one that the City of New London, Connecticut largely brought upon itself by pursuing and winning the Kelo v. New London case at the Supreme Court in June 2005.

Some "win." In what Ed Morrissey at Hot Air calls "a fitting coda to a chapter of governmental abuse," pharmaceutical manufacturer Pfizer is leaving the global research and development headquarters it built in New London just eight years ago.

The significance of the move should resonate nationally, because, as the Washington Examiner explains, Pfizer's original decision to locate in New London was driven by the City's promises to eliminate a nearby neighborhood -- promises which led to the Kelo litigation once residents, including Susette Kelo (pictured above), pushed back:

To lure those jobs to New London a decade ago, the local government promised to demolish the older residential neighborhood adjacent to the land Pfizer was buying for next-to-nothing. Suzette Kelo fought the taking to the Supreme Court, and lost. Five justices found this redevelopment met the constitutional hurdle of "public use."

The New London Day elaborates, while petulantly managing to avoid any mention of what has clearly become the local four-letter word -- "Kelo" (bold is mine):

Monday’s CBS Early Show took time to highlight the selling power of the Obama family as correspondent Dean Reynolds reported: “Bill Grimshaw thinks he has the perfect sales pitch for the house he’s trying to sell on Chicago’s south side....he lives right next door to the Obamas....because of this...special location, the sky could well be the limit.”

Reynolds gushed over how the Grimshaw family was “So close they let Obama use their living room as a backdrop to record a holiday message days before last year’s Iowa caucuses.” He then spoke with real estate agent Matt Garrison, who argued: “We anticipate an Obama – an Obama premium. We don’t know exactly how much that is.” Reynolds wondered: “An Obama premium?” Garrison reiterated: “Yeah, an Obama factor, an Obama premium.” Reynolds further explained: “For example, Matt says living next door to the Nobel Peace Prize winner could make Grimshaw a winner, too.” Garrison remarked: “We certainly think it makes the price go up.”

As if the Fannie Mae and Freddie Mac (Fan and Fred) crackups weren't bad enough, IBDeditorials.com noted on Thursday evening that another bad-mortgage shoe is about to drop. This time it's at the Federal Housing Authority (FHA).

First, let's revisit Fan and Fred to remind readers just how complete the disaster has been at these decades in the making Democratic crony-controlled entities.

A little-noticed CNNMoney.com item by Chris Isidore in late July told us what the original announced loss estimate had been a year earlier (bolds are mine throughout this post):

When Congress was debating the bailout of Fannie and Freddie last July (of 2008), the official estimate from the Congressional Budget Office was that a bailout would most likely cost taxpayers $25 billion, with only a 5% chance of the price tag reaching $100 billion between them.

Isidiore then noted that just one year later the loss estimate had doubled:

It isn't often that one can see two decades of history re-written in under ten minutes.  But such was the occasion on this morning's episode of Morning Joe. Max Blumenthal, author of "Republican Gomorrah: Inside the Movement that Shattered the Party," spent his time on the show demonstrating the combined power of cognitive dissonance, wanton ignorance, and a willingness to re-write historical fact.

Let's take it in chronological order, shall we?

First, Blumenthal is asked to present the major thesis of his book:

Pigs aren't flying, but don't be surprised if you see a few of them sprouting wings.

The Associated Press, which along with the rest of the establishment media has almost totally ignored the aftermath of the awful Kelo v. New London ruling over fours ago, actually carried a mostly fair and balanced piece about where things stand by writer Katie Nelson. Though I've followed the story reasonably closely since the fall of 2005, I learned a few things I didn't know about the City of New London's original lofty promises.

I do have a couple of quibbles, the biggest one being the current headline ("Conn. land vacant 4 years after court OK'd seizure"). It seems to me that the word "Kelo," as in Susette Kelo (pictured at top right), belongs in it. My other problem is that it's a weekend story and will thus be lightly read.

But let me highlight the better paragraphs in Nelson's report:

Both have loyal following, but their fans are on opposite sides of the political spectrum.

CNBC's Rick Santelli rose to prominence earlier this year when he railed against President Barack Obama's policies on live TV from the floor of the Chicago Mercantile Exchange. He's a hit with conservatives staging tea parties to protest the bailout culture in Washington throughout the country. 

Arianna Huffington, who appeared as a guest host on CNBC's March 31 "Squawk Box" has following of left-wing readers and bloggers, as the editor of the very popular Huffington Post blog. The two faced off on "Squawk Box" about how the housing crisis should be handled. Huffington asked Santelli what his thoughts were on more government assistance for underwater homeowners to prevent another round of foreclosures.

"Well, the whole country is underwater I guess," Santelli replied. "It's just a matter of where you want to point the bailout gun. I would certainly like to see some of those mortgage contracts gone through to find out where the erroneous and inaccurate and illegal contracts and separate those from the rest because I think that a lot of the information on the original mortgage contracts is not accurate and I don't think it would be very fair to put those in the same camp as other foreclosures."

Maybe it was just too easy to assume the worst of the news network most others in the press love to hate. Or perhaps it was deliberate.

Whatever the reason, the Agence France-Presse (AFP) wire service's Wednesday story about reaction to Barack Obama's sort-of State of the Union Speech the previous evening spent four of its last five paragraphs pinning a report harshly critical of various claims in the speech on Fox News. 

True, Fox News's web site carried the story ("Fact Check: Obama's Words on Home Aid Ring Hollow"). But it was actually written by the Associated Press's Calvin Woodward and Jim Kuhnhenn. (Yes, the AP actually wrote an Obama-critical story. More on that in a bit.)

Here are the four paragraphs in question from the AFP report, which otherwise lavishes praise on Obama's speech and rips into Louisiana Governor Bobby Jindal's GOP response performance:

Advantage Rick Santelli -- and Larry Kudlow.

CNBC reporter Santelli's Thursday morning "Shout Heard Round the World" (CNBC's term) objecting to the Obama administration's mortgage modification program on the floor of the Chicago Mercantile Exchange quickly went viral, and struck two nerves. First, it ignited a groundswell of support from the over 90% of the of the nation that pays its bills and plays by the (normal) rules. The other nerve it struck was at the White House, whose spokesman Robert Gibbs struck back with a level of poorly concealed fury and contempt that I don't think I've seen publicly displayed by any other administration in my lifetime.

Larry Kudlow had Santelli as a guest on CNBC's Kudlow Report Friday night (CNBC video here; YouTube here [HT Scott's Slant]).  As one would fully expect by this time, Santelli made a few huge, emotionally-charged points of his own. The gratifying stunner is Kudlow's passion in the final third of the interview, where he sounded the alarm over freedom of the press, basic respect, and bullying.

Looking around the web, at least at this point, this interview has gained relatively little exposure, leaving the distinct and incorrect impression that Gibbs has the rhetorical upper hand.

No way. The CNBC pair of Santelli and Kudlow has the White House on its heels. Common-sense, passionate, principled assertions rooted in truth will tend to do that. Here's the full transcript (bolds are mine):

Rick Sentelli's rant for the ages (transcript here) on CNBC's Squawk Box yesterday criticizing the recently passed stimulus package and the Obama administration's mortgage modification program was marred somewhat by the studio hosts. Though their tone was semi-humorous, it's telling that their instincts were to characterize the traders present at the Chicago Mercantile Exchange as a "mob," and to assume that Santelli somehow controlled them ("putty in your hands"). When Santelli suggested a Chicago Tea Party, one of the hosts warned that Mayor Daley and the National Guard would be mobilized.

In October of last year, in a memorable exchange on the day that history may decide was when American free-market capitalism entered the point of no return, CNBC reporters seemed somewhat amused that Treasury Secretary Hank Paulson had "put a (figurative) gun to the heads" of major bank CEOs to force them to accept government "investment."

Well if you don't mind my asking, will we see any reaction out of CNBC's studio folks to an example of real mob rule in the mortgage marketplace?

In a story at WJZ in Baltimore whose headline and coverage almost seem deliberately understated ("ACORN Trains Citizens To Protest Home Foreclosures"), the station tells us that ACORN "protesters" had broken into and occupied a foreclosed home (HT Inside Charm City via Michelle Malkin):

The battle between New London, Connecticut and the residents of its Fort Trumbull neighborhood began in 1998 when the City decided that it would redevelop the area for ultimate ownership by others and, if necessary, take the residents' properties for that "public purpose" -- not for "public use" (i.e., roads, bridges, schools, etc.), as the Fifth Amendment clearly intended.

Susette Kelo and other Fort Trumbull residents pushed back and sued to try to stop the city's plans. Ultimately, the Supreme Court rendered its 5-4 decision in Kelo v. New London in June 2005, erroneously (as the Founders would almost certainly have seen it) siding with the city.

In July 2006, after intervention by Connecticut Governor Jodi Rell prevented the City from carrying out its declared intent to forcibly remove final holdouts Kelo and the Cristofaros if necessary, the city and the holdouts settled.

More than 2-1/2 years after the settlement,  3-1/2 years after the Supremes' decision, and 11 years after the city's initial plans, oh boy -- a new tenant has finally moved into the Fort Trumbull Neighborhood. It's a government tenant (link at New London Day will be available for about a week), and the move is into an existing building:

Everything is wonderful and peachy-keen in Obamaland if you rely on the reporting on the front page of The New York Times. Just ask CNBC's Jim Cramer. On his Feb. 12 program the "Mad Money" host dealt with the $789 billion stimulus package.

"Now if you were to believe what's in the papers, holy cow - except for the funny papers - you would think this package was wonderful," Cramer said he said of the reported agreement congressional leaders had reached on ironing out the package's details.

Cramer was referring to a front-page article by Richard W. Stevenson in the Feb. 12 Times, which gave a glowing account of this as a victory in the early stages of the Obama administration.

"Look at the front page of The New York Times today," Cramer said. "I love this one, ‘Measuring a Victory,' by this guy, Stevenson. He's a famous guy, you know? He's not Robert Louis Stevenson, he's Richard W. Stevenson. He writes - it's like a comedy routine - ‘It is a quick sweet victory for the new president and potentially a historic one.' Who edits this B.S.?"

With all the populist sentiment generated from the economic slowdown by politicians, CNBC "Mad Money" host Jim Cramer is seeing eerie similarities with the comments of President Barack Obama and the words of a communist revolutionary.

Cramer, appearing on MSNBC's Feb. 2 "Morning Joe," drew comparisons between remarks between the first head of the Soviet Union, Vladimir Lenin, and Obama. Obama criticized Wall Street's moneymaking on Jan. 30, when he said there would be a time "for them to make profits, and there will be time for them to get bonuses. Now's not that time. And that's a message that I intend to send directly to them."

Cramer said that was similar to Lenin's writings. "Let me tell you something, we heard Lenin," Cramer said. "There was a little snippet last week that was, ‘Now is not the time for profits.' Look - in Lenin's book, ‘What Is to Be Done?' is simple text of what I always though was for the communists, it was remarkable to hear very similar language from ‘What Is to Be Done?' which is we have no place for profits."

A link to a story in the New London (CT) Day (story will be available for only a few days) arrived in my e-mail yesterday thanks to a Google alert:

Deed Gives NL Building A New Address
Italian Dramatic Club outlived street it used to be on in fort area

The story stands as a bitter reminder of the blatant favoritism that took place during the sad saga of Susette Kelo and her neighbors in the Ft. Trumbull area of that Connecticut town.

Ms. Kelo and her neighbors had their homes condemned, and ultimately lost in appeals that went all the way to the Supreme Court, where in June 2005 that court's majority ruled that when our Founders wrote "public use" in the Constitution's 5th Amendment (i.e., building a bridge, or a road, or a school), they really meant "public purpose" (doing anything the government deems to be a worthy cause, including taking someone's property and conveying it to another for a worthy "development" cause).

As you can see from the following Google Earth map image that is probably about two years old, the Italian Dramatic Club (IDC) sits virtually alone at 79 Chelsea Street:

The roundtable on Monday night's Special Report with Brit Hume on FNC was not kind to the New York Times's hit piece on Sunday's front page that blamed President Bush and only Bush for the mortgage meltdown, ignoring the Democrats in Congress who protected the irresponsible push for more "affordable housing" by Fannie Mae and Freddie Mac (as Times Watch noted yesterday).

Nina Easton, Washington bureau chief of Fortune magazine, pronounced herself "flabbergasted when I read this story, flabbergasted....You cannot write a story about affordable housing policies and blame it on George Bush instead of the Democrats. I mean, it’s just, it’s outrageous."

From the Monday night Special Report with Brit Hume:

UPDATE AT END OF POST: White House issues statement concerning "Irresponsible Reporting by New York Times."

It's official: the housing and financial crisis gripping the nation is President George W. Bush's fault.

So said the New York Times Sunday in a 4900-word, front page hit piece entitled "The Reckoning - Bush's Philosophy Stoked Mortgage Bonfire."

And what was this heinous, catastrophic philosophy that caused all our nation's problems? "Americans do best when they own their own home."

Oh the humanity.

Sadly, much as the Times and its liberal colleagues conveniently forgot and/or ignored all American history prior to March 2003 in order to blame the nation's problems on Bush and the invasion of Iraq, the authors of this disgrace omitted and/or skirted over virtually all the relevant pieces of legislation and issues that led to our current financial crisis  -- as well as articles on the subject published by their very paper!!! -- instead focusing readers' attention on the following (emphasis added throughout, photo courtesy NYT):

Neil Cavuto and Ben Stein had quite an argument about bailouts on FNC's "Cavuto on Business" Saturday morning that nicely covered the issues people on both sides of this contentious debate will likely be discussing around dinner tables this Thanksgiving, though hopefully with less screaming:

In today's "You've Got to be Kidding Me" moment, the San Francisco Chronicle advocated that folks who owe more on their mortgages than their homes are worth should stop making payments so they can qualify for a government bailout.

I'm not kidding.

Disgustingly titled "Are You an Idiot to Keep Paying Your Mortgage," the article actually instructed readers upside-down in their real estate the ins and outs of how they can transfer responsibility for their own investment mistakes to others (emphasis added throughout, picture courtesy The Economist):

Sometimes government tries to fix the problem; then it makes the problem worse.

In 2004, economists at the University of California, Los Angeles (UCLA), studied the policies of President Franklin Roosevelt's New Deal and determined it actually prolonged the Depression by seven years.

Harold L. Cole and Lee E. Ohanian blamed anti-free market measures for the slow recovery in an article published in the August 2004 issue of the Journal of Political Economy.

Cole and Ohanian asserted that Roosevelt thought excessive business competition led to low prices and wages, adding to the severity of the Depression.

"[Roosevelt] came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies," Cole said in a press release dated Aug. 10, 2004.

CNN correspondent Carol Costello’s report on Monday’s American Morning program unquestioningly repeated a claim by Democrats in Michigan that Republicans in the state would disqualify voters affected by home foreclosures. She began her report by phrasing the accusation this way: "Lost your house to foreclosure? Democrats in Macomb County, Michigan, say beware -- Republicans, they say, want to make sure you lose your vote, too."

Costello’s report, which began 40 minutes into the 7 am Eastern hour of the CNN program, is the first in a week-long series of reports by the network called "Count the Vote," which aims at "investigating potential problems in key battleground states" with the voting process, as co-host Kiran Chetry put it in her introduction to Costello’s report. Both Chetry and Costello iterated the Michigan Democrats’ contention in three slightly different ways at the beginning of the report. It’s based on a supposed quote by Macomb County, Michigan Republican chairman James Carabelli in the Michigan Messenger, a liberal website (Costello actually described it as such).

It's sad when just about the only place to get the truth about what happened to precipitate the current mortgage-lending mess is the Colbert Report.

Jim Cramer of CNBC's "Mad Money" appeared on the Comedy Central show on Monday.

The takeaway soundbites:

• Cramer said "I'd love to, but I can't" pin the blame for the debacles at Fannie Mae and Freddie Mac on President Bush.
• He noted that "the Democrats got a lot of campaign contributions from Fannie and Freddie and vice-versa. It was a big circle," and that this is what enabled the two government-sponsored enterprises to continue "to lend to anybody."

Though Colbert was in attempting-comedy mode, Cramer eventually got to the point where he clearly wasn't kidding (video is at the National Review Media Blog link).

Here's the relevant verbiage, which begins at the 2:20 mark (bolds are mine):

Today on CNN's American Morning, Cook County sheriff Tom Dart was interviewed by anchor John Roberts.  Dart has announced his office will quit carrying out evictions stemming from mortgage foreclosures until lenders start exercising "due diligence."  During the interview, Dart made the point that some evictions involve people who have not defaulted on their mortgages, but have simply been paying rent to landlords who did. Roberts's comments at the end of the interview are telling:

ROBERTS: So the Illinois Bankers Association is accusing you of "vigilantism" and, quote, "at the highest level of an elected official." What do you say to that?

DART: I think the outrage is on my part with them. That they would so cavalierly issue documents and have me throw people out of homes who have done absolutely nothing wrong. They played by all the rules. And because of their ignorance and their lack of diligence and going out to their own property and finding out who is out there, innocent people are being set out.