Even conservative estimates by the Congressional Budget Office say the cost for this bailout will run to $41.7 billion, with $16.8 billion offset by higher taxes. No one has any idea of the real cost. The most expensive provision gives the Treasury temporary authority to pour money into Fannie Mae and Freddie Mac. The CBO says this could cost $100 billion, or it could cost "nothing." So it threw a dart at the wall and assigned a $25 billion price tag to the Fan and Fred bailout.

Likewise, the bill's $300 billion to refinance and insure distressed loans through the Federal Housing Administration will supposedly cost just a few billion dollars. That assumes few homeowners and lenders will sign up for the program because lenders will have to take a 10% haircut to be eligible. If no one needs this program, why is it there? If lenders do take advantage, they're bound to dump their worst loans on the feds. So as with the Fan and Fred bailout, the FHA guarantee will be either superfluous or much more expensive than we're led to believe.

Alongside these big-ticket items, we suppose the $4 billion tax credit for first-time home buyers, or the $4 billion in "community development" pork grants, or the $180 million for housing counseling are merely routine outrages.

On the other hand, the kid-glove treatment of Fannie Mae and Freddie Mac is very much worth worrying about. On the floor of the House yesterday, Democrats argued that this bill was the least Congress could do "for the people," given the way the government had "helped" Bear Stearns. The cost borne by Bear Stearns was having its shareholders all but wiped out and half its employees pink-slipped. Countrywide was likewise sold at a fire sale price. Not so these two government-chartered giants.

Fannie and Freddie may well be too big to fail, as Treasury Secretary Hank Paulson keeps reminding us. That is true in large part because they were allowed -- no, encouraged -- to grow like Topsy while Congress shielded them from oversight.

-- Wall Street Journal

Labels: CBO, Congress, Countrywide Financial, democrats, Economics, taxes

[Chicago Sun Times] "When I was president, we were determined to turn around two decades of stagnation and inequality, which had led to the growth of all these ills in our cities," he [former President Bill Clinton] said.

But under President Bush, "we're now in the sixth year of an economic recovery that's been great for rich people, while those in the middle and just under lose ground."
This is not true -- in fact it flies in the face of the latest data from the Congressional Budget Office (CBO), and Bill Clinton and fellow Democrats know it's not true. Perhaps it's because the CBO and economic analysts identify as a key reason for lower-income growth the 1990s GOP-backed legislated welfare reform, which Clinton vetoed twice before it passed on the third try.

The CBO found in May that, "In 2005, inflation-adjusted income for low-income households with children averaged $16,800, 35 percent above what it had been in 1991."

In fact, the lower class boom was best during Bush's first term:

"Those households with children that were in the low income category in 2001 had, on average, significant increases in income in each of the next two years. For those households, average inflation adjusted income increased by about 45 percent, from $16,700 in 2001 to $24,100 in 2003."
Perhaps Bill Clinton can explain how a 45 percent grown in income within two years is "losing ground."

Must be similar to his "definition of is."

Labels: CBO, Clinton, Economics, tax cuts, taxes, welfare reform