The Note, 2/18/09: Obama Outlines Mortgage Rescue Plan in Phoenix


President Obama heads to Phoenix today to unveil part three of his economic recovery plan:  dealing with the foreclosure crisis.

Let’s hope the markets like it better than parts one and two.  Yesterday as the President signed the stimulus bill, the Dow sank 297 points, the second biggest drop of 2009.  The only day worse this year was when Treasury Secretary Geithner unveiled his financial rescue plan and the Dow tanked more than 330 points.

The White House won’t make the same mistake twice.  Unlike the Geithner announcement -- which was short on specifics and struck many in the financial world as half-baked -- this plan will be detailed.  It will also be expensive with huge sums of money going both to banks and to individuals in mortgage trouble.

The initial price tag is already known:  $50 billion from the TARP program.  But I am told the overall cost could climb over $200 billion, and although the White House will not immediately seek more money from Congress, another request down the road is likely. 

“At the heart of the plan is an effort to make loans more affordable by providing a government subsidy to help mortgage companies modify certain troubled loans,” writes Deborah Solomon in the Wall Street Journal.  “Because any reduction in monthly payments will hurt the bank or investor who owns the loan, the government is expected to help defray the costs with a subsidy. That could take the form of a direct payment. The government could also match, point by point, any interest-rate reduction made by the servicer. The administration may provide between $800 to $1,000 per loan, according to a financial-services representative familiar with the plans.” 

Per  ABC News' Jake Tapper, the plan will include a program to allow homeowners to refinance their mortgages through Fannie Mae and Freddie Mac if they owe more than their homes are worth and “an effort to make loans more affordable through various means – extending loans, lowering interest rates, and other ways.”

The venue for the announcement is Dobson High School in Mesa, Ariz.  The local paper of record describes just how badly the foreclosure crisis has hit Mesa and the rest of the Phoenix metro area.“Home building has slowed to a crawl,” write Catherine Reagor and Dan Nowicki in the Arizona Republic.  “More than half of metro Phoenix's home sales are foreclosure homes being resold for bargain prices. The median sales price of an existing home fell to $136,000 in January, down 49 percent from the peak in 2006.

“What many Valley residents want to hear from Obama today is how long it will take to get the new programs up and running, and which homeowners can expect to receive help. Homeowners and industry leaders will also be listening for what the government plans to do to make more lenders modify the loans of homeowners facing foreclosure.”

Auto Bailout Redux.  The good news is that GM and Chrysler made their deadline, submitting plans on how they’re using taxpayer money to become viable companies once again.  The bad news:  they need more cash, as much as $21 billion more.  So far, Ford is holding firm on taking no government bailout money.

Per the Detroit News:  “Their pleas for more aid, raising the tab for the auto industry's rescue above $40 billion -- which includes a $39 billion bailout for the two automakers plus requests from suppliers -- present a major challenge for the new administration of President Barack Obama. The government wants to help the domestic industry restructure, but faces mounting bailout fatigue across the nation.”  The war.  The other announcement made by the president yesterday may have the more far-reaching implications:  Another 17,000 U.S. troops to Afghanistan.  As a percentage of U.S. troops already in the country, this is actually a bigger troop build-up than President Bush’s surge in Iraq.  But don’t call it a surge.  Unlike the Iraq build-up, this won’t be temporary.

The key point comes from U.S. commander in Afghanistan Gen. David McKiernan in the very last paragraph of The USAToday’s write-up of the announcement:  “Despite the U.S. buildup, McKiernan said in December that the day when Afghans are able to manage government and security operations wasn't yet in sight. ‘We're at least three or four years away from, perhaps, that tipping point,’ he said, adding: ‘2009 will be another tough fight.’"

Did you know this? Obama spoke over the phone with Afghan President Hamid Karzai yesterday for the first time since the inauguration.

Question:  How long will it take before President Obama’s core supporters sour on the war in Afghanistan?  During the campaign, talking about the need to do more in Afghanistan was a way to criticize President Bush for going to war in Iraq.  Now President Obama is facing long-term commitment to a war Richard Holbrooke calls more difficult than Iraq.   There’s no groundswell of liberal opposition yet, but yesterday, Win Without War, a group headed by former Rep. Tom Andrews (D-Me.) gently condemned the president’s decision to send more forces. 

"The first principle for someone who finds himself in a hole is to stop digging," said Andrews. "The US policy ‘hole’ in Afghanistan is not of the new Administration’s making … But it is important for the President to consider if adding new US combat forces in Afghanistan, without a new and comprehensive plan for US policy there, we might be digging an even bigger hole.”

Slowest Transition Ever?  One major complicating factor for the stimulus plan is that there are still so many jobs unfilled throughout the Obama administration.

“President Obama blasted through all sorts of speed records pushing a $787 billion economic plan through Congress,” writes Peter Baker in the New York Times.  “But even after signing it into law Tuesday, he faces another problem: virtually no one is in place at his cabinet departments to actually spend a lot of the money.”

“The once efficient Obama transition has ground to a near standstill after tax problems bedeviled several of his nominees, leaving the top echelon of his government largely unassembled. Three cabinet jobs remain unfilled, only two of the 15 cabinet departments have deputy secretaries confirmed, and the vast majority of lower-level political jobs remain vacant.”

Look at what Paul Light, the world’s leading transition savant, has to say about the Obama transition effort

“They were really fast in the first 100 meters,” Light said, “but this is a 10,000-meter process, and they’ve slowed down quite dramatically. I would have bet you the farm they’d break the recent record, but now they’re on pace to become the slowest.” 

This will be the recurring theme over the coming months.  The Washington Times headlines, “Spending the windfall won’t be easy.”  Many of the federal agencies that will be showered with cash from the stimulus package haven’t figured out what they’ll do with it.  The key quote comes from NASA, which is due to get about an extra billion dollars.

"The bill provides funding for science, exploration, aeronautics and other agency needs," said NASA spokesman Michael Cabbage. "We are working to decide how best to apply the money and will report back to Congress within 60 days."

FOR THE RECORD:  Yesterday’s Note was posted at 8:17 a.m.  Mike Allen’s Playbook was posted at 8:18 a.m.

Now he tells us.  Michael Gerson uses his column today to declare the stimulus bill “a bad, necessary bill.” 

“The president and Congress were left with one option: attempting a fiscal jolt to counter the economic cycle,” writes Gerson. “Such efforts in the past have often been mistimed, with the cavalry arriving just after the settlers have been massacred. But one has to try. In this case, necessity was the mother of excess.”

Suggestion to Mike:  next time you may want to weigh in before the bill passes Congress over the “no” votes of every one of his fellow Republicans in the House. 

The always interesting Holman Jenkins provocatively suggests the problem with the Bush and Obama financial rescue efforts has been too much democracy:  Ben Bernanke and Henry Paulson, in a phone call last Sept. 17, decided to involve political actors in the bailout following the Lehman debacle. They had good, legal, democratic and constitutional reasons for doing so, but it was a terrible mistake.” 

The Burris mess.  Now that the Senate Ethics Committee has opened a preliminary inquiry into whether Sen. Roland Burris lied – or worse -- about his quest for his Senate seat, both the Chicago Tribune and the Washington Post are calling on Burris to resign. 

"Burris' story has more twists than the Chicago El, and none of them good,” editorializes the Washington Post.  “The people of Illinois have suffered enough. Mr. Burris should resign 

Question:  When will Harry Reid, who was heavily criticized for his initial efforts to block Burris from getting the Senate seat, say “I told you so”?

The Log Cabin Republicans have an all-star GOP line-up for their annual convention in Washington on April 17.  Meghan McCain, the 24-year-old daughter of John McCain, will be there.  So will Steve Schmidt, McCain’s former chief campaign strategist and former NJ governor Christie Todd Whitman.  New GOP chairman Michael Steele has been invited, but there’s no word yet on whether he’ll drop by.   

Finally, what would The Note be without a Sarah Palin item?

With a Juneau dateline, The Washington Post finds some folks in Alaska who consider their governor the arctic’s Evita and others who see her as “Dan Quayle with a ponytail.”  Either way, the Post finds Palin having a tough time adjusting to post-election life in Alaska.  Not only has she not made a decision about 2012, she hasn’t even decided whether to run for re-election in 2010.

Writes Michael Leahy:  “A number of factors seem to have contributed to the bumpy homecoming: a residual anger among Democrats for the attack-dog role Palin assumed in the McCain campaign, lingering resentment from Republicans for the part she may have played in McCain's defeat, and a suspicion crossing party lines that the concerns of Alaska, at a time of economic crisis, will now be secondary to her future in national politics.” 

The Kicker:

“The guy is like a ticking time bomb, the last revenge of Blagojevich.” -- a top Democrat talking about Senator Roland Burris

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