All aboard Dr. Barack Obama’s Magical Mystery Bus Tour! If you live in one of the lucky cities and towns along the way, you too can be blessed by our marvelous and mystical commander-in-chief dispensing money, cure-alls and taxpayer elixirs at a rate not seen since the last great presidential flim-flam artist, Bill Clinton, took to the hustings.
Jobs one day; easy home refinancing the next. Health care. Social Security. Veterans benefits. Something for everyone!
With his signature American Jobs Act DOA in Congress, President Obama is trotting out a Hail Mary to Americans understandably weary of the still-faltering economy. Using his latest slogan, “We can’t wait,” as a backdrop, Obama is hawking various federal government programs, including the Home Affordable Refinance Program (HARP), to boost his sagging poll numbers and buy the love of the electorate.
The White House hopes HARP will allow between 600,000 and 1 million homeowners with loans guaranteed by Fannie Mae and Freddie Mac to refinance their underwater mortgages and stave off foreclosure. As Reuters reports, Obama believes that expanding HARP “will help more homeowners refinance at lower rates, save consumers money and help get folks spending again”; in other words, he hopes it will magically cure the nagging recession in one fell swoop.
Like other Washington panaceas, this one sounds good. Mortgage rates have been pushed down by the Federal Reserve during the economy’s long downturn, which arguably would offer homeowners who take advantage of HARP extra cash each month and provide a shot in the arm to a terrible housing market. Reality, of course, is quite different.
The program itself suffers from significant limitations. Most notably, it applies only to mortgages backed by Fannie Mae and Freddie Mac. According to Mark Calabria of the Cato Institute, the program “is available only to those who have already had a mortgage for over two years, are current on their mortgage, and have missed no more than one payment per year.” Calabria equates the program to “helping only those that do not need any help.”
James Pethokoukis, an economist at the American Enterprise Institute, explains that the idea behind HARP is full of holes, and that similar tricks in the past have not aided our sluggish economy. He notes, for example, that Obama promised that some 4 million homeowners would benefit with the creation of HARP in 2009. However, only about 20% took advantage of the program. Pethokoukis also concludes that the high-end estimate that 1 million homeowners will take advantage of HARP represents only a fraction of the 11 million property owners who are underwater in their mortgages.
This program raises a huge red flag. Relying, as it does, on increasing Fannie’s and Freddie’s involvement in the troubled mortgage market, it will take us down the very same road that led in part to the financial crisis in 2008. Here we have quasi-governmental entities, Fannie Mae and Freddie Mac, once again guaranteeing mortgages for people with no real equity in their homes. As Yogi Bera observed, “it’s like déjà vu all over again.” But hey, what’s more important — pandering to voters with government panaceas, or strengthening the economy by reducing government efforts to manipulate markets? For this president, obviously the former.
Bob Barr represented Georgia’s Seventh District in the U.S. House of Representatives from 1995 to 2003. He provides regular commentary to Daily Caller readers.