Many American banks are flush with cash, yet they aren’t making many loans.
And despite President Obama’s repeated promises that his “healthcare reform” legislation would “lower the cost of healthcare,” many health insurance providers are raising the premiums they charge their customers (some by as much as forty percent) as the new law is phased-in.
So why, after nearly twenty-two months of President Obama “gettin’ people some help” (his folksy way of describing his interventions into the private sector economy), is the economy at a standstill, and in some instances getting worse?Because Obamanomics has put the economy in a state of uncertainty and chaos, and it penalizes hardworking, productive people who play by the rules.
That sounds like a gross generalization, now doesn’t it? And I must be one of those unsophisticated simpletons that Senate Majority Leader Harry Reid and Vice President Biden have recently lamented about, whose tiny little mind can’t comprehend all the complex goodness that President Obama and his Administration have brought about – right?
Well, let me apply my simple mind as best as I can, and consider a few facts. And let’s start by looking at the Obama Administration’s intervention into two of the most troublesome areas of our economy in the last three years -the real estate, and mortgage lending markets.
There’s no doubt that when Barack Obama took office in January of 2009, home values and mortgages were in free-fall. After years of the federal government enabling so-called “subprime mortgages,” which were mortgage loans extended to less-than-qualified borrowers, and after years of highly unregulated adjustable rate mortgages, two lethal conditions ensued both at the same time: the interest rates on those “ARM” loans began to reset upward, while the value of real estate properties began to decline.
Against this backdrop, the Obama Administration set out to do what many people believed at the time was a compassionate thing – and began “rescuing mortgages.” If the Administration could bring the skyrocketing rate of foreclosures to a halt, so the reasoning suggested, then home values would eventually stabilize and a vital sector of our economy would eventually start growing again.
So in March of 2009, President Obama unveiled the “Making Home Affordable” initiatives, a set of federal policies that would make it “easier” for people to stay in their homes and keep paying their mortgages. But how can the government arbitrarily make it “easier” for somebody to pay their debts, when they’ve already made commitments and signed loan documents and then end up with insufficient funds?
The Obama Administration’s approach to this task was multi-fold. In some instances, the “Making Home Affordable” program called for the lender to arbitrarily lower the interest rate of the loan (to as low as 2% for some borrowers); in other situations, the Obama Administration managed to force banks that had accepted government “bailout funds” to eliminate portions of the principle that a borrower owed on a mortgage, or to extend the terms of a mortgage to 40 years or more.
It all seemed so “compassionate,” like a “quick fix” idea that would obviously stop the foreclosure crisis and stabilize the markets. Except that by September of 2009 the fallout of President Obama’s meddling was becoming apparent: despite all the good intentions, well over fifty percent of borrowers who had sought help from the “Making Home Affordable” program had already fallen behind on their mortgage payments again. Worse yet, mortgage lenders, having been stung and strong-armed with a slew of new governmental requirements and mandates and guidelines, were turning away qualified borrowers with good credit and good money.
That was in 2009. Now, in the fourth quarter of 2010, home foreclosures are on the rise again and the Obama Administration, having already spent untold billions of our tax dollars trying to stop home foreclosures, is threatening mortgage lenders with new “fees” and “fines” if they move to quickly to foreclose on a delinquent loan. Meanwhile, interest rates remain at rock-bottom lows, while qualified borrowers are still not getting banks to lend on any consistent basis.
And herein lies the problem: rather than incentivizing banks to begin lending again to qualified borrowers, the Obama Administration’s efforts to “fix” the mortgage crisis have been entirely focused on providing “help” to people who aren’t playing by the rules, who aren’t keeping their commitments, and who aren’t paying their mortgages on time. And because of federal mandates and “guidelines,” private lending institutions are obsessed with “providing help” to people who are for whatever reason not keeping their commitments, rather than providing great service to customers who are paying their bills, or lending to highly qualified would-be borrowers.
This is an example of how President Obama’s attempt at “gettin’ people some help” has actually hurt. And his force-fed healthcare “reform” has in similar ways sent the entire private sector of our economy into a state of uncertainty and chaos.
May we all cast a vote in favor of hard work, and the people who play by the rules, this November.
Austin Hill is an Author, Consultant, and Host of "Austin Hill's Big World of Small Business," a syndicated talk show about small business ownership and entrepreneurship. He is Co-Author of the new release "The Virtues Of Capitalism: A Moral Case For Free Markets." , Author of "White House Confidential: The Little Book Of Weird Presidential History," and a frequent guest host for Washington, DC's 105.9 WMAL Talk Radio.