Garry Sisco's Blog

save the mortgages

Garry — Sun, 05 Oct 2008 21:24:41 EDT

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A Mortgage Plan

Garry — Sat, 04 Oct 2008 20:26:56 EDT

We are in a vicious cycle: falling housing values cause losses on securities, which reduce bank capital, thereby tightening lending and causing house prices to fall further. The cycle has spread beyond housing, but housing is the place to fix it.

Housing starts are at their lowest level since the early 1980s, while there are more vacant houses than at any time since the Census Bureau started keeping such data in 1960. Millions of homeowners owe more on their mortgage than their house is worth. Foreclosures are accelerating. House prices continue to fall, weakening household balance sheets and the balance sheets of financial institutions.

But this can stop. The price of a home is partially dependent on the mortgage rate -- a lower mortgage rate raises house prices.

We propose that the Bush administration and Congress allow all residential mortgages on primary residences to be refinanced into 30-year fixed-rate mortgages at 5.25% (matching the lowest mortgage rate in the past 30 years), and place those mortgages with Fannie Mae and Freddie Mac. Investors and speculators should not be allowed to qualify.

The historical spread of the 30-year, fixed-rate conforming mortgage over 10-year Treasury bonds is about 160 basis points. So a rate of 5.25% would be close to where mortgage rates would be today with normally functioning mortgage markets. One of us (Chris Mayer) recently published a study showing that -- assuming normally functioning mortgage markets -- the cost of buying a house is now 10% to 15% below the cost of renting across most of the country. Rising mortgage spreads and down-payment requirements are what's still driving down housing prices. We need to stop this decline.

The direct cost of this plan would be modest for the 85% of mortgages where the homeowner owes less on the house than it is worth. Lower interest rates will mean higher overall house prices. The government now controls nearly 90% of the mortgage market and can (and should) act on this realization. Remove the refinancing option and you can have lower rates without substantial cost to the taxpayer. Homeowners would have to give up the right to refinance their mortgage if rates fall, although homeowners could pay off their mortgage by selling their home. For borrowers with lower credit scores, the mortgage rate would be greater than 5.25%, but it would be less than their current rate.

Now, what about mortgages on homes that are worth less than the total amount of the loan? These mortgages could be refinanced into a 30-year fixed-rate loan to be held by a new agency modeled on the 1930s-era Homeowners Loan Corporation. New mortgages would be made of up 95% of the current value of a home.

The government might use two approaches to mitigate its losses. It could offer owners and servicers the opportunity to split the losses on refinancing a mortgage with the new agency. Servicers would have to agree to accept these refinancings on all or none of their mortgages, to avoid cherry-picking. Or the government should take an equity position in return for the mortgage write-down so that the taxpayers profit when the housing market turns around.

Our calculations based on deeds and Census data suggest that the total amount of negative equity for all owner-occupied houses is $593 billion. However, capping an individual's write-down to $75,000 would reduce the government's total liability to $338 billion and cover 68% of individuals with negative equity. Even this loss will be reduced as the proposal spelled out here raises housing values and economic activity, and contemplates loss sharing with lenders, hopefully matching the experience of the old Homeowners Loan Corporation.

While the net cost is modest compared with many plans on the table, it would require that the government could assume trillions of dollars of additional mortgages on its balance sheet. But we have already crossed this bridge with the explicit "conservatorship" of Fannie Mae and Freddie Mac. In any event, these mortgages would be backed by houses and the verified ability to repay the debt by millions of Americans. In addition, by putting a floor under house prices, this proposal would raise the value to taxpayers of trillions of existing home mortgage assets already owned or guaranteed by the FDIC, the Fed, the Treasury, Fannie Mae and Freddie Mac, among others.

Improvements in household and financial institution balance sheets will increase investment and consumer spending, which will mitigate the extent of the current downturn. Americans, on average, spend about 5% of the equity of their homes on consumer goods and services. So if home prices increased 10% above where they would have been without government intervention, we estimate consumers will have an additional $100 billion annually to spend.

In addition to focusing on the very real problem in the housing market, the plan could be implemented immediately. As a result of the U.S. government's conservatorship of Fannie Mae and Freddie Mac, origination of new mortgages can be financed quickly. Congress would have to raise the overall borrowing limit and approve the new federal purchases of negative equity loans. But it will likely take the Treasury much longer to buy troubled assets than Fannie and Freddie, and it would have to seek the involvement of many additional private actors, as opposed to using vehicles already in place.

The decline in housing prices remains the elephant in the room in the discussion of the credit market deterioration. Let's start there.

Mr. Hubbard, dean of Columbia Business School, was chairman of the Council of Economic Advisers under President George W. Bush. Mr. Mayer is a professor of finance and economics and senior vice dean of Columbia Business School.

Please add your comments to the Opinion Journal forum.

Power all of Texas with Solar!

Garry — Wed, 25 Jun 2008 21:15:43 EDT

Texas is the national leader in wind power and we have the potential to meet the rest of our energy needs with solar power. In fact, if we put solar panels on an area thirty miles by thirty miles in west Texas, we could generate enough electricity to power the entire state at prices competitive with new nuclear plants!

But to bring all that clean wind and solar power from west Texas, we need to invest in our transmission grid. Right now, the Public Utilities Commission is deciding how much renewable energy transmission to build.

The most ambitious plan they're looking at would create transmission capacity for almost an additional 18,000 megawatts of wind and solar power, which would reduce smog pollution from power plants by 13% and global warming pollution by 16%.

As the PUC prepares to make its decision, I invite you to sign this petition urging the Commissioners to select a plan that maximizes the renewable energy transmission grid.

http://environmenttexas.org/action/clean-energy/transmission?id4=ES

Sincerely,

Luke Metzger
Environment Texas Director
LukeM@environmenttexas.org
http://www.environmenttexas.org

P.S. Thanks again for your support. Please feel free to share this e-mail with your family and friends.

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Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:38:58 EDT

http://digg.com/2008_us_elections/FOX_Pundit_Wishes_for_Obama_Assassination_Laughs

http://www.PetitionOnline.com/ER052408/petition.html

Senator Clinton has once again crossed the line of decency. Even if one wishes to give her the benefit of the doubt with her assassination ‘gaffe’, her lack of historical accuracy makes this a 'Bosnian sniper fire' level discrepancy. Her husband had, in fact been, assured of the nomination with Paul Tsongas withdrawal in March of 1992. Further recent history has shown that those campaigns which fight on into the convention always lead to general election losses. These facts coupled with her previous effective endorsement of Senator McCain’s qualifications over Senator Obama’s, along with the not so very subtle racism of her campaign, make her utterly unfit to be Senator Obama’s Vice-President.

http://www.PetitionOnline.com/ER052408/petition.html

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:38:28 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:37:06 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:36:26 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:35:51 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:35:07 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:34:16 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:33:42 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:33:07 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:32:16 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:30:52 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:30:14 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:29:36 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:28:59 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:28:11 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:27:24 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:26:41 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:26:03 EDT

Fox pundit wishes for Obama assassination... and Laughs!

Garry — Mon, 26 May 2008 13:24:30 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:18:58 EDT

http://www.PetitionOnline.com/ER052408/petition.html

Senator Clinton has once again crossed the line of decency. Even if one wishes to give her the benefit of the doubt with her assassination ‘gaffe’, her lack of historical accuracy makes this a 'Bosnian sniper fire' level discrepancy. Her husband had, in fact been, assured of the nomination with Paul Tsongas withdrawal in March of 1992. Further recent history has shown that those campaigns which fight on into the convention always lead to general election losses. These facts coupled with her previous effective endorsement of Senator McCain’s qualifications over Senator Obama’s, along with the not so very subtle racism of her campaign, make her utterly unfit to be Senator Obama’s Vice-President.

http://www.PetitionOnline.com/ER052408/petition.html

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:18:31 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:17:39 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:16:36 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:15:59 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:15:17 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:14:39 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:13:59 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:13:12 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:12:15 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:11:30 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:10:11 EDT

http://www.PetitionOnline.com/ER052408/petition.html

Senator Clinton has once again crossed the line of decency. Even if one wishes to give her the benefit of the doubt with her assassination ‘gaffe’, her lack of historical accuracy makes this a 'Bosnian sniper fire' level discrepancy. Her husband had, in fact been, assured of the nomination with Paul Tsongas withdrawal in March of 1968. Further recent history has shown that those campaigns which fight on into the convention always lead to general election losses. These facts coupled with her previous effective endorsement of Senator McCain’s qualifications over Senator Obama’s, along with the not so very subtle racism of her campaign, make her utterly unfit to be Senator Obama’s Vice-President.

http://www.PetitionOnline.com/ER052408/petition.html

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:09:27 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:08:47 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:07:11 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:06:21 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:04:24 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 17:02:52 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 16:59:37 EDT

Reject Clinton for VP

Garry — Sat, 24 May 2008 16:58:05 EDT

Obama ad takes on Big Oil

Garry — Sun, 30 Mar 2008 15:07:13 EDT

http://www.thedailygreen.com/environmental-news/latest/obama-big-oil-ad-47033002?kw=ist

Has the public opinion wind shifted enough for this fundamental energy issue to become a primary part of the political debate? Until now, the Iraq war and more recently the economy have dominated the lists of issues at the forefront of voters' minds. Energy and environmental issues have not.

It's up to us

Garry — Mon, 24 Mar 2008 22:39:38 EDT

I have distributed this petition as far and wide as I can figure how to. Many have signed it. Thank you.
Some have criticized my effort. The most startling of these criticisms is that this petition is somehow in violation of the principles of Senator Obama’s campaign.
I fail to understand exactly how demanding that the Democratic Party stand up for its own principles violates Senator Obama’s principles.
We need to realize this fact: Senator Obama cannot take this stand, nor can any “super delegate” take this stand without it simply appearing as a partisan gambit of some sort.
Perhaps you have noticed that many of Senator Obama’s supporters want a different kind of political process. These people know their hopes cannot be realized in Hillary Clinton.
Democrats in certain positions find it very difficult to take such a stand. But, Democrats like us can and should demand our Party’s adherence to its own principles. I am not saying this is the only way to do this, but it is one way. One which will surely get the Party’s attention should it grow large enough.
If you are sick of Clinton politics as am I, or you want to preserve the hope of a different politics that Barack offers, then I suggest this might be for you.

http://www.petitiononline.com/obama725/petition.html

Following her comments of the last three weeks, Senator Hillary Clinton should abandon her Presidential Campaign. In fact she should probably resign her Senate seat. Endorsing the Republican candidate over Senator Obama and casting aspersions on Senator Obama's patriotism and religion are tactics we expect from certain Republican political advisers. We do not expect them someone who would ask us to vote for her for President.

It's up to us

Garry — Mon, 24 Mar 2008 22:25:52 EDT

How much will we take?

Garry — Sat, 22 Mar 2008 22:06:24 EDT

Surely the Democratic Party has a limit? Or, do we stand for nothing?  http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=59567 If you're Hillary Clinton and you've just been caught in a "whopper," the only thing to be grateful for is that it's Good Friday and people are distracted. How bad could this story be for her? When you tell the American public you faced gunfire, and it turns out all you reallyfaced was a little girl with flowers - well, that's as bad as it gets. When you dramatically say you made a journey that was too dangerous for the President, only to have it revealed that he made the same trip two months earlier - and that your teena ged daughter was by your side - that only makes it worse.

http://www.huffingtonpost.com/rj-eskow/how-will-hillarys-bosnia_b_92844.html
A petition made by Obama supporters to be sent to the DNC
stating that if Senator Clinton becomes the Democratic Nominee for
the presidential election, you will either:
a) abstain from voting in the general election
   or
b) a third-party-candidate during the general election.
Here's the link: http://www.petitiononline.com/obama725/petition.html  Following her comments of the last three weeks, Senator Hillary Clinton should abandon her Presidential Campaign. In fact she should probably resign her Senate seat. Endorsing the Republican candidate over Senator Obama and casting aspersions on Senator Obama's patriotism and religion are tactics we expect from certain Republican political advisers. We do not expect them someone who would ask us to vote for her for President.

How much will we take?

Garry — Sat, 22 Mar 2008 22:05:46 EDT