A bipartisan majority of the House of Representatives sent a letter to Jeffery Zients, Acting Director of the Office of Management and Budget (OMB), in regard to the EPA’s plans to regulate greenhouse gases at power plants through the New Source Performance Standards.  Initiated by Ed Whitfield (R-KY), Energy and Power Subcommittee Chairman and John Barrow (D-GA), the correspondence requests that the OMB halt the rulemaking, which is under review at this time.  Concern over higher electricity rates and loss of jobs has prompted this action.

The members wrote:

“Affordable, reliable electricity is critical to keeping and growing jobs in the United States and such a standard will likely drive up energy prices and threaten domestic jobs.  A recent USA Today article stated that electricity rates have already skyrocketed in the past five years, which has added about $300 a year to what households pay for electricity.  A GHG standard will make that trend worse.

“Forcing a transition to commercially unproven technologies could send thousands of U.S. jobs overseas and raise electricity rates on families and seniors at a time when the nation can least afford it.  We respectfully ask that you stop EPA’s GHG rulemaking because of the devastating impact it will have on jobs and the economy.”

For a copy of the letter, click here.

The Obama administration is determined to move forward with the greenhouse gas regulations even though Congress rejected the unpopular cap-and-trade legislation.  The regulations are opposed because the proposed standards are expected to increase electricity rates and have a negative impact on the economy.

The EPA and other proponents of the rules argue that they will offer major public health benefits and assist in tackling climate change at a minimal cost.

According to The Hill, the letter sent to the EPA is the latest in a string of attempts to abort the EPA’s pending rules limiting greenhouse gas emissions from power plants that burn fossil fuels.  Members of the bipartisan group have been pursuing this end for several months.

-Candice Lanier

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Fannie Mae and Freddie Mac are the two semi-government agencies that pretty much drive the mortgage and housing market. And, they’ve driven it into the tank. Fannie & Freddie started out in life as your standard government program that was going to “help” people buy houses. They purchased loans from primary lenders – in the beginning, your bank – and guaranteed repayment to investors even if the borrower defaulted. As Delaware Online notes, they “…helped people buy homes at affordable interest rates.” And with basically no money down.

Let me be really clear right here about a couple of things. First of all, in the interest of full disclosure, I spent 15 years in the mortgage banking industry. Second, the problems in the mortgage industry were created by the Congress and were exacerbated by Administrations of both parties. To his credit, President Bush made a half hearted attempt to reform mortgage lending and was met with a full-on war from Democrats who, by that time, controlled the Congress and who went into full media mode holding hearings that lavished praise on the Democrats who were running F&F into the ground. I’ll put it in perspective. The biggest proponents of the actions of F&F and regulators acting under the authority of a number of legislative acts, primarily the Community Redevelopment Act, were the likes of Barney Frank, Chris Dodd, Sheila Jackson Lee and their ilk who, combined, don’t have a double digit IQ.

At any rate, when the housing and mortgage markets headed south in 2005, the die was cast because F&F owned most of the mortgage paper in the US and to say it was rapidly turning into toilet paper would be kind. So far, F&F have cost the US taxpayers $150B in bailout costs and that will certainly go up, the only question is how much. Prior to 2008, F&F were quasi non-governmental units and in 2008 they were taken over by the government to prevent a crash in the housing industry. And yes, if you were wondering, I typed that with a straight face.

The problem in the industry right now is fairly simple. There is a huge oversupply of housing and a shrinking pool of qualified buyers. As long as the Administration and some of Congress are meddling with the market in an attempt to inflate housing prices, the problems in the real estate industry will drag on. The market is nowhere near the bottom and it will continue to struggle until it gets there.

Let’s look at the problem of oversupply. MLS listings in many major markets are running at ten to eighteen months supply based on sales. A healthy market would be in the vicinity of five months. In addition to the houses currently listed on MLS, you can add in roughly double the MLS numbers being held by banks “real estate owned” (REO) departments that are not currently listed. So we’re at about three years supply. Then add in the houses that are in the foreclosure process where a notice of default has been issued but the trustee sale has not been executed because of a combination of legal issues related to foreclosures and the fact that the banks would rather have the inventory on their books as a default than in their REO department. Double the MLS numbers again, we’re at five years supply. Please note that this number doesn’t include homes that are in default but the foreclosure process hasn’t started. It’s a real number, but for sake of argument we’ll ignore it. Oh, and that doesn’t count houses that their owners would like to sell that can’t be sold because it’s currently worth less than the mortgage. So, we’ve got five to seven years supply available today.

Let’s look at borrowers. Oops, make that “qualified” borrowers. If you’d like to qualify for a mortgage, you have to have good-to-excellent credit (scores of 640+), income that you can verify with either W2s or tax returns, a down payment of 3% to 20% and a debt ratio of typically less than 30%. If you’re self employed and manage to avoid paying much in income tax, typical of self employed folk, even with fantastic credit you can forget about qualifying for a mortgage. I don’t have a “good statistic”, but from personal experience I’m guessing the pool of qualified buyers – and I’m not including non-FHA subprime borrowers – is down something like 30% since 2005.

OK, huge pool of inventory, small pool of borrowers. Got it? Remember “supply and demand”? Lesson? Prices have to come down a whole lot more and until they do, the “housing industry” is going absolutely no where. Please look beyond the headlines when you see things like “Housing is up 4% in January…” because somewhere way down in the article you’ll usually find something about prices dropping in the same month. The bottom line is this: the industry is a big mess, thanks to Federal regulators, and more action at the Federal level is only going to make the problem last longer.

The Washington Post – of all places – summarizes the problem we’re facing with F&F quite well…

The private market has not bounced back with the rest of the economy. Policymakers are concerned about the risk to taxpayers presented by the government’s large footprint in the mortgage market. The Obama administration plans to publish more details about overhauling housing finance in the coming months.

“The housing sector will continue to be a drag on our economic recovery until we end the ongoing bailout of Fannie and Freddie and replace the existing government-backed mortgage finance system with a purely private market solution,” said Rep. Scott Garrett (R-N.J.), chairman of the congressional subcommittee that overseees the firms.

However, that is not a universal view. Top administration advisers — and many outside economists — say the government must still play a significant role in housing.

Salient points:

1. The private market for mortgages has not bounced back because of the regulatory outreach history of the federal government and it will not “bounce back” until the government is out of the market.  The risk of dealing with regulators is way too high for the reward of servicing three percent mortgages.
2. The Administration will be publishing “more details” about overhauling housing finance – read “increasing regulation” – in the next few months.  See point one.
3. Rep. Garrett is absolutely right.  And, in addition, it needs to be made clear that the private market owns the moral hazard that goes with defaults.
4. As long as the government is playing a role in housing, the market will never “recover”.  Ever.  They created this mess thanks to overreaching legislators and regulators and no one in their right mind would chose to participate on a private basis, the risk far outweighs the reward.

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The federal budget.  It’s not your family budget that’s for sure.  When you think of the idea or concept of a budget, what comes to mind?  Well, for starters let’s look at what Mr. Webster has to say about the word, and please note that we have to get down to FOURTH entry to get to our subject…

A “statement of the financial position…”, a “plan for the coordination of resources”, “money available and required”?????????  I don’t think so.

In fact, the federal budget has become nothing like any rational person would imagine or expect, primarily because of the influence of politicians, and the problems we’re going to talk about today don’t start or end with the current occupant of the White House, although he and his Congressional enablers have gone to great lengths to refine the budgetary process to an art form and that well discuss.
In fact, it’s been well over 1,000 days since the United States government actually had a budget.  We’ve had a bunch of “continuing resolutions” that provide money for government operations, but no budget has actually been voted on since Barack Obama has been President.  When cornered by the press on the subject, Senate Majority Leader, and the single man whose responsibility it is to bring legislation – like the budget resolution – to the floor of the US Senate for a vote, Harry Reid, said the Senate had “deemed” the budget passed.  Kinda like they “deemed” ObamaCare passed in the US House.

Which brings us to the present.  The President laid out his “budget priorities” early this week.  And, if you study his speech it’s obvious that his number one priority is getting reelected in November.  The President may well have set THE standard for pandering, and that is no mean feat in Washington DC.  He also raised the bar for blatent and craven deceit.

Let’s take a look at what one of my favorite people, John Stossel, had to say on the subject…

President Obama said in his State of the Union speech, “We’ve already agreed to more than $2 trillion in cuts and savings.”

That was reassuring.

The new budget he released this week promises $4 trillion in “deficit reduction” — about half in tax increases and half in spending cuts. But like most politicians, Obama misleads.

Mr. Stossel is a kinder man than I.

“Deficit Reduction” is a parlor game in Washington DC.  It’s a variant of the “guess how much I saved you” game husbands and wives have played since the dawn of the “sale”.  A friend related this version to me, I’m sure you’ll see yourself in it, just as I did, and in both of the players.  Man comes home from a Saturday afternoon at the toy store.  Says to his wife, “Wait ’till you see what I got ‘us’!”, and brings in a new wide screen LCD TV.  “Isn’t it beautiful?  And guess what!  I saved ‘us’ $500 on it!”  Wife looks at the TV and says “Give me the $500.”  Husband responds, “Well, I don’t actually have it.  See, the TV was marked down and I put it on our MasterCard!”

Get the picture?  Husband wants a toy.  Family has no real plan to buy the toy.  Husband buys toy at a price less than “full retail” and touts the savings to sell the toy to his wife.  In the real story, the TV went back.  Husband sulked and eventually got over it.  In Washington DC, they get to keep the TV and take the $500 they “saved” and spend it on beer and caviar.  And best of all, they get to send the bill to my unborn grandchildren.

See this video for a perfect example of how this works… courtesy of our own MoonWithYogurt.com

Stossel notes…

But what the president was talking about is not even a cut. The politicians just agreed that over the next 10 years, instead of increasing spending by $9.48 trillion, they’d increase it by “just” $7.3 trillion. Calling that a “cut” is nonsense.

[...]

Democrats use this deceit when they want more social spending. Republicans use it for military spending.

And the press buys it. The Washington Post has been writing about “draconian cuts.”

So, what we’re dealing with is Mr. Obama’s wish list.  What it’s NOT is a “budget” – see Webster once again.  It’s nothing more than a campaign document that he will point to frequently and talk about how he’s all about “fairness” and how the Republicans are stonewalling him (oh that they actually would) on meeting the needs of the suffering middle class so they can serve the 1%.

In terms of the actual magnitude of the deceit that Mr. Obama is capable of, please keep in mind that while we don’t have a “budget” we do have the “Budget Control Act of 2011?.  This was the legislation that added $2.1 trillion dollars to the debt ceiling and put in place “automatic spending cuts” to the tune of $1.2 trillion dollars over the next ten years.  Those statutorily mandated cuts are not evident in Mr. Obama’s plan for 2012.  ZeroHedge walks through the ugly details and notes the following:

When asked about this at a budget committee hearing today, [OMB Director Jeffrey] Zients just smirked and refused to answer the very simple question: “Does your plan spend more money over the next ten years, than the agreement in current law”

I’m personally in the mood for some of this.

-Michael Becker

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Umm BigBrother! Watch us please.

Video surveillance has been discussed, but not really debated.  In the UK, it’s a way of life, you can’t go anywhere in London or other major cities without being on camera.  It hasn’t been so intrusive in the US, but you can bet it will be.  Police agencies have been installing cameras, at first under the Patriot Act, to keep us safe from terrorists, and now, as in the UK, to just “keep us safe”.  Civil liberties groups (ACLU, etc), have been consistently raising concerns about the cameras, but so far the public seems, at best, unconcerned.

Sunday’s Washington Times highlights just how far we appear to have come in the pursuit of safety.

The Citizens Association of Georgetown, a private neighborhood association, plans to pay for the installation of up to 10 cameras in the hopes that the additional surveillance will deter crime.

“The No. 1 thing we would like is deterrence,” said Diane Colasanto, a member of the association’s public safety committee. “We just want crime not to happen here. But if crimes are committed, we hope the images from the cameras are images police can use.”

Just so we’re all on the same page, Georgetown is the suburb of Washington DC where the rich folk and the movers-and-shakers live.  And they live in close proximity to the poor folk who generate one of the nation’s highest crime rates live.

The DC police installed camera in high crime areas five years ago, but they adopted regulations governing their use, including signs posted in the areas where they’re used and restrictions on who can view the videos among others.  There will be no such limitations on the cameras in Georgetown and, needless to say, that’s raising eyebrows that are attached to civil libertarians.

A number of questions really need to be answered.

“Do they reduce crime or help solve crime?”  is one of the first I’d be interested in having answered.  Since cameras have been installed in a number of cities and have been in use for a number of years, there is data available and it was cited in the Times article.  The results are mixed.  John Verdi, general counsel of the Electronic Privacy Information Center notes that cameras generally don’t prevent crime or increase closure rates, they tend to shift crime to other areas.  Additionally, the results vary depending on whether the cameras are monitored or not.  Cameras installed in DC are not monitored and seem to have little effect on either crime or closure while the cameras in both Chicago and Baltimore are monitored and studies show that crime tends to decrease on those monitored neighborhoods.  So the answer is a mixed bag.

Is the use of CCTV expanded over time?  In other words, are the cameras put in for one reason and then their use expanded to monitor other things.  Think about it.  These cameras are controlled by units of governments and when did government ever NOT expand their reach?  From an Australian report in 2001 on CCTV…

Originally surveillance cameras systems were installed to deter burglary, assault and car theft but their use has been extended to include combating ‘anti social behaviour’…

In the US, the debate is often framed in “anti-terrorism” terms and typically will find broad support.  The secondary framing is “public safety”, and again, that finds broad public support.  People seem willing to sacrifice their civil liberties for a perceived improvement in their safety.  There are a number of obvious reasons for this, “civil liberties” is a rather amorphous concept to most Americans who’ve never lived in a country where government agencies routinely make people disappear.  (Please don’t bother to post a variety of conspiracy theories on this subject unless you’ve lived in the eastern bloc before the wall came down, thank you.)  In addition, “safety” has a direct appeal to people who read about folks who’ve been kidnapped or shot at random or been victims of robbery while just walking down the street.

BalancedPolitics.org has a good picture of the pros & cons of this issue.  I would encourage you to take a good look at it, but I’ll summarize it for you.

The pros are obvious, and include things like the fact that our justice system is generally not constructed to stop crimes from occurring, rather to catch and punish the guilty.  It doesn’t realistically take into consideration that terrorist acts are not “crimes” per se, rather they are “acts of war” and as such, the damage to both lives and property are out of proportion to the idea we normally associate with “crime”.  There are two points in the “pro” summary that are worth specifically noting…

6. A certain amount of trust has to be put in the hands of the government if we are to accomplish anything.

9. Our American system of checks-n-balances prevents the government from going too far.

I’ll be coming back to these, but let’s look at some “cons” first.

Four of the six “cons” deal with, frankly, things I consider to be “straw-men”.  Like “taking away civil rights… destroys the very definition of what it means to be an American…”; constitutional protections and racial profiling.  We are at war, and Congressional action prior to commitment of forces is the real equivalent of a declaration of war, and the Constitution is not a “suicide pact”.  Bottom line, I find no efficacy in these arguments at all.

On the other hand, two of the six are real concerns.

3. There is a potential for abuse by this administration or future administrations.

6. There is a potential for abuse by this administration or future administrations.

And, you’ll note that they dovetail with the two “pros” I noted above.  It all comes down to one simple question, “Do you trust your government?”

If your answer is “yes”, there’s no point in reading any farther.  If your answer is anything but an unconditional “yes”, then the question comes down to how far should they go with surveillance?  I’ll offer my answer as a place to start the discussion.

I am absolutely opposed to routine CCTV surveillance.  Surveillance for criminal activities – as opposed to national security – should require a warrant.  I personally don’t find the perceived gains worth allowing ANY government agency carte blanche to video my life.  For national security issues, I would prefer a warrant, although I would relax the criminal “probable cause” rules, and I would make use of the information gathered for any purpose other than dealing with the national security issue a very serious felony that can’t be pled out.

What do you think?

-Michael Becker

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