No Runny Eggs

Minnesota governor Tim Pawlenty speaks to the county chairs

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Fannie Mae relaxing loan down payment requirements

NEW YORK (Reuters) – Fannie Mae, the nation’s largest source of home financing, said on Friday it is lowering the amount of down payments required on mortgages it purchases, even in areas where home prices are falling.

Starting on June 1, the new requirements of 3 percent or 5 percent, which replace rules set in December, will apply nationally to loans on single-family primary residences, it said.

But wait, it gets better….

Fannie Mae also said it will continue to allow loans with Community Seconds, one of various assistance programs, for up to 105 percent combined loan-to-value ratio.

With Community Seconds, a borrower has a second-lien mortgage to help cover down payment and closing costs, with funding usually provided by a state or local housing agency, employer or a nonprofit organization.

“We recognize that down payment assistance programs remain a viable tool for borrowers who can afford a mortgage long-term, but might need a little help getting started,” Sullivan said.

Are you flippin’ kidding me? The only piece they’re missing is giving loans to folks who can’t afford to pay them! Oh wait…

On May 6, when Fannie Mae reported first-quarter results, it announced other initiatives, including a plan to provide up to $10 billion to help Housing Finance Authorities (HFA) serve first-time homebuyers “of modest means.” In some cases, Fannie Mae said, it will buy HFA mortgages that have greater than 97 percent loan-to-value ratios.

“The definition of insanity is doing the same thing over and over again and expecting a different result.”

It’s time to start buying gold and burying it in the back yard.

Why do we have people like Ben Bernanke, people who study economics, trade and monetary policy, handling the  Nation’s economic affairs  when we could have someone like the latest Governor of New York, David Paterson.

Paterson has come out against the gas tax holiday. A position which I agree with him on. My disagreement with the holiday is based on a fear that any reduction in the price will allow Congress to think they’ve actually accomplished something to solve a long term issue. Governor Paterson’s issue is that he things the gas companies are greedy. For his evidence he points to what happened following Hurricane Katrina:

At a press conference about a personnel matter in his midtown office, Paterson told reporters to go to the oil companies and "ask them why, the week after Katrina"”the Katrina Hurricane"”August 29, 2005, ask them why the gas prices went up in that week.

“It couldn’t have had anything to do with the gas,” Paterson charged. “Because gas delivery took place three weeks before then. They sold you the same gas that was in their tank the week before at"”at some points"”10 to 15 percent higher."

Paterson thinks that because the gas was put into tanks at one price, that should dictate what price the gas should come out of the tanks.

David, have you ever been in an area prior to a hurricane hitting? If you have, you would know that plywood has this nasty habit of increasing in price right before a hurricane. That plywood didn’t cost more coming in just because the hurricane was coming but it did cost more going out. Another thing David, plywood is also rationed when a hurricane is coming. Yup, the day before a hurricane you could have bought every single piece from your local home building supply company but the day the hurricane is announced, rationing starts.

How about another example David? After a hurricane generators get more expensive. Those generators were all sitting there prior to the hurricane at the same cost but lower price than after the hurricane where the cost stayed the same but the purchase price goes up.

The point David, is that increasing prices are the mechanism that free markets use to help manage demand for products that are, or are expected to be, in short supply.

I think we should test all political candidates for their knowledge of Adam Smith’s “The Wealth of Nations.” If they fail the part about supply and demand, they don’t get to run, pure and simple.

Instituting the test may not get us any better politicians but we would at least know that they do know better and not have to wonder whether they were lying to us or just flat out ignorant.

Typical elections, especially Presidential elections, are usually focused on how to get the largest portion of the populations to vote for you.   Yes there are nuances due to the electoral system that makes a Presidential election a bit more like a bunch of individual state elections, but at a macro level, it’s still about getting more votes than your opponent.

The 2008 election, one that now appears likely to be between John McCain and Barack Obama, is shaping up to be nearly the opposite of traditional focus.   Rather than getting the most people to vote for you, the McCain/Obama contest looks to be more about getting the fewest number of people to not not vote at all or to not vote aganist you.

On the Democrat side we’ve been seeing stories for a few weeks about one camp’s voters not voting for the other candidate if they should win the nomination.   The exit polls from Tuesday’s West Virginia primary continued the trend as the AP reported:

Barely a third of Clinton supporters say they’d vote for Obama over John McCain in a November matchup. As many claim they’d vote for Republican John McCain and a quarter said they would not vote for president. If that horse race were Clinton vs. McCain, half of Obama backers say they’d vote for Clinton, about three in 10 say they’d back McCain and the rest would stay home.

On the Republican side while initially rejected, there had been a gradual acceptance of McCain as the nominee.  As various blog sites still had animated discussions about whether McCain was a conservative or if his various cross party endeavors had eliminated him from the use of the “True Conservative” moniker, most who did not originally support McCain had come to a point that they believed the greater good was served by supporting McCain. But then McCain made his environment speech in Oregon. Subsequent to that speech, the conservative blogs have become littered with comments such as:

His speech was the last straw. I am a conservative and John McCain WILL NOT get my vote. His global warming position is down right scary. I’ve tried really hard to get in the he’s “my guy” mindset and it’s just not going to happen. Every time I get close he opens his mouth.

So who will win? Well, it looks like it will be the candidate who gets the fewest of the folks who can’t stand them not to not vote for them.

Ain’t politics great!

On Wednesday, the Chicago City Council reversed its ruling  of two years ago and again allowed foie gras to be served in the city.

The ban two years ago was argued for by animal rights advocates who said the process of creating the foie gras was inhumane.   The vote to ban foie gras was passed 48-1.

Leaving the animal rights folk infuriated, the Council voted this time 37-6 to overturn the ban.

OK, truth be told, I’ve never eaten foie gras, at least that I know, so it’s not like I’m rushing to Chicago or dropping my boycott of Chicago restaurants.   No, the reason I see hope in this story is based on the Alderman’s reason for bringing the vote,

“Supporters of this legislation have accomplished their goal by raising awareness of this issue,” Tunney said in a statement. “And while I respect their viewpoint, this is clearly a matter the council should stay out of and let the educated consumer and chefs make their own menu choices.”

Most elected officials are happy to opine and weigh in on any issue presented to them. It doesn’t seem to matter anymore whether the issue is even within their constitutional purview. In fact, Congress is known for taking on nearly any topic they want by simply swiping it with the “interstate commerce” pen.

When was the last time you heard an elected official say that an issue was none of their business?

How refreshing! There may be hope after all!

If Barack Obama wants to run as a populist he needs to get a better pulse of the people or maybe start reading some polls.

I wrote here  about Barack’s confusion about what he wants to do with Capital Gains taxes and that a majority of Americans are against any increase in those taxes.   In fact they go so far as to say that they believed that a President who raised Capital Gains taxes would raise other taxes as well.

It appears the American folks can still see how 2+2=4.

In a Rasmussen Report poll released Tuesday, 60% of Americans believe that tax increases will hurt the economy. As you might expect, 74% of Republicans agreed with that statement. What Barack needs to pay attention to is that 49% of Democrats and 60% of unaffiliated voters believe the same. Contrary to his primary results, this is an issue that truly crosses racial lines as 61% of White voters and 57% of African-American voters agree with the statement. In the “Can you hear me now,” observation of the poll, a significant majority of 70% of those under 30 believe that increasing taxes will hurt the economy.

With the economy now the number one issue in the Presidential campaign and McCain being more trusted to handle economic issues, Barack needs to figure out whether to lead, follow or get out of the way. Continuing to provide confusing, non specific tax and economic proposals are not going to help Barack reach his goal.

As oil and in turn gas, prices continue to increase and no action or plans in sight that suggest any near term reduction, I’m seeing articles and comments along the lines of, “It’s not uncommon in Europe to pay $7 for a gallon of gas.   If they can stomach it, so can we.”

An example of this logic is in this opinion piece  by Paul Krugman.   Krugman takes what is otherwise a thoughtful argument i.e. all the talk about speculation driving an “oil bubble” may not be based on  well reasoned economics but rather on wishful thinking, and destroyed his credibility with:

The consequences of that (oil) scarcity probably won’t be apocalyptic: France consumes only half as much oil per capita as America, yet the last time I looked, Paris wasn’t a howling wasteland. But the odds are that we’re looking at a future in which energy conservation becomes increasingly important, in which many people may even "” gasp "” take public transit to work.

Why is this kind of logic silly? How about a quick geography lesson.

France has an area of approximately 250,000 square miles, about the size of Texas which is approximately 269,000 square miles. France has a population of 64M people which means they have a density of approximately 256 people/Sq. Mi. Texas has a population of 24M people which means they have a density of approximately 164 people/Sq. Mi. Beginning to see an issue? Let’s extrapolate that to the entire United States. To be generous, I’ll exclude Alaska and Hawaii. The continental US has an area of 3.2 Million Sq. Mi. The continental US population is approximately 302 million people. That translates to a density of only 94 people/sq. mi. I won’t even drag you through the densities that exist west of the Mississippi and east of the Pacific coastal states. To suggest that a European country that is a fraction of the size of the US with a population density nearly 3X the US is comparable in energy use is naive at best and dishonest at worst.

OK, let’s try a different tact. Let’s assume we could get rid of all those nasty, hydrocarbon burning, carbon dioxide spewing personal vehicles. If tomorrow we banned the use of all personal vehicles we would at most, reduce our oil per capita consumption by 40% (it would be less than 40% because of course, we’d have to provide transit solutions for those people and many of those solutions involve petroleum as the fuel). Even with a 40% reduction, we’d still be using 10% more per capita than France.

My point in all of this is that trying to compare the US to a European country, especially one that is a fraction of the size of the US with a population density nearly 3X the US, as comparable in energy use is naive at best and dishonest at worst.

The only way that we are close to being comparable to Europe is in the taxes and other costs waiting to be imposed to “solve” our energy “problem” by forcibly removing our need for oil. Oh, and another way that we’ll be like Europe, we’ll be heading for our own “Dark Ages.”