Obama’s Fiscal Policy One Step Forward Two Steps Back

Obama, Bernanke, Geithner Fiscal Policy at Odds with Reality

The Obama Administration and his financial arm Bernanke and Geithner have professed to bring back the recovery to middle America by providing financial incentives for home mortgages.  This worked briefly for a few months only from the perspective of lower home interest rates, and although the rates remained low for a few months there have been still been problems for people able to qualify for new loans.  This due to the new regulatory requirements for those able to qualify and now there is a new problem.

The New Obama Federal Home Loan Program has begun to implode under its own weight of debt.  Home rates have gone up to what they were last year simply do to the government’s policy of purchasing its own debt.  The Obama financial program intends to inflate its way out of this recession but that happens to cause the dollar’s value to drop and home mortgage rates to go up.

This financial prescription for economic recovery is in direct conflict with itself and shows how inept Obama and his financial gurus are to pushing socialism on an economy that is ingrained with capitalism.  The market decides what will and what will not work financially.  The housing sector will definitely not lead America out of the economic abyss created by both Republicans and Democrats.

If anyone happens to say that Obama inherited this mess please ask them why he has signed a $1.3 trillion dollar budget with 9,000 pork barrel earmarks.   Or when Obama complains about the budget deficit he inherited of $455 billion ask them why he has allowed the projected budget deficit this year to reach a record $1.75 trillion , according to the Congressional Budget Office.  Then when an Obama fanatic says the Obama will reduce this deficit ask them how exactly doe he propose to do that, what has he proposed to cut?

Federal Reserve Chairman Bernanke may be waking up the the fact that he is not in control of the economy as he thought he was.  His efforts to bring down borrowing costs to revive the housing market and help the economy has come to a screeching stop.  Mortgage rates are rising the average 30-year fixed-mortgage rose to 5.27 from 4.7 percent as of yesterday, according to Bankrate.com.  Mortgage rates are almost back to where they were in March before the 30-year rate fell to a record and sparked a refinancing boom.

Rates are rising as President Obama has pledged to spend $275 billion to help keep as many as 9 million Americans in their homes and stem the rise of foreclosures. His measures also include a tax break of as much as $8,000 for first-time homebuyers that wouldn’t require repayment.  The only problem with the tax break is that it only applies for new home construction.

Bernanke has to step up the purchases of Treasuries and mortgage-backed debt with printed dollars out of thin air  that equates to the amount of new Treasury debt being dumped onto the market.  Treasury yields are rising as the U.S. government sells debt to itself and Bernanke and President Obama wonder why the mortgage rates are going up?!

The market is responding as refinance applications this week fell 19 percent to the lowest since early March, before the U.S. announced a loosening of Fannie Mae and Freddie Mac rules to allow more borrowers with little or no home equity to arrange new loans. The same problem that got America into this problem in the first place is again taking place no equity loans!

Yields on Fannie Mae and Freddie Mac mortgage bonds tumbled today after rising earlier this week. Increases this week, spurred in part by a jump in Treasury yields, at one point were as big as any since 1984, before narrowing to only the most since late January.

At the same time as the Fed is buying up the Treasury’s debt Mortgage foreclosures rose to a record 9.12 percent of U.S. home loans and house prices dropped the most on record in the first quarter, industry reports show.  The U.S. delinquency rate jumped from 7.88 percent, the biggest-ever increase, and the share of loans entering foreclosure rose to 1.37 percent,

The Fed plans to buy as much as $1.25 trillion of mortgage- backed securities and up to $300 billion in Treasuries as part of a plan to lower rates. Minutes of the central bank’s April 28-29 meeting show some officials said the Federal Open Market Committee may yet boost asset purchases to spur a more rapid economic recovery.

As the Fed demonstrates that it is completely incapable of manipulating its way out of this crisis, market forces are contracting in the wake of a coming Tidal Wave if inflation from the Fed buying the Treasury’s debt.  This week by action