Democrats need to stop giving in to this blackmail.

It's a Democratic marjority now, so I don't think we could call this blackmail. I mean, why did Hillary for the Bankruptcy Bill before voting against? Was it blackmail or love of legal bribery?

er, why did Hillary VOTE for the Bankruptcy Bill...

Not to mention that supporting homebuilders increases the housing supply just when prices are falling. Can someone explain why this wouldn't lead to more price drops and thus more mortgages underwater?

Maybe I'm being especially dense today, but why does working with people whose houses are being foreclosed prop up housing prices? The reason they can't pay the mortgage lenders and banks is that terms of the loan are changing and they can't keep up with the costs. But why would working with them so that they can stay in their homes, even if that means extending the amount of years on a mortgage and letting them miss payments for a few months, prop up housing prices? Is it simply an issue of supply and demand? Do prices have to fall to a certain level before something good, whatever that is, can happen? It's very possible I am missing something obvious, but whatever the case, please help me understand this.

The bill still has to pass the House. As of now there wasn't the homebuilder tax break in the House version.

Huh? I agreed with this post until the end, and then I got lost. The Democrats control both houses of Congress, and Christopher Dodd is a Democrat. Homebuilders are major political contributors. There's no reason to believe that Democrats are "giving in" when it comes to corporate welfare. There are some differences between the Republicrats and the Democans, but support for corporate welfare just isn't one of them.

I wonder if this is going to help any small business construction firms, in which case I would think it would be more defensible.

What y81 said. This bill gets 84 votes and you blame Republicans for it? C'mon , Kevin.

Kevin wrote: "The lesson here is this: Republicans will never give up ... Democrats need to stop giving in to this blackmail."

The account you present does not sound like Democrats are "giving in to blackmail" nor does it give any evidence or explanation of how the minority Republicans allegedly "blackmailed" the majority Democrats into supporting this corporate welfare legislation.

Indeed, the quote from Dodd to the effect that the bill is "a major, positive step in the right direction" certainly sounds like he is an enthusiastic supporter of corporate welfare.

Perhaps what you ought to have said is "Democrats need to start living up to their traditional, liberal, economic populist values and looking after the interests of ordinary people, instead of espousing policies of tax cuts for the rich and corporate welfare."

Assuming that the Democrats are somehow, implausibly, being "blackmailed" is to give them a pass.

Assume that every Democrat who voted for the passage of this bill is a Republican-Lite, enthusiastic supporter of corporate welfare at the expense of everyone else, and treat them accordingly.

And instead of using the cozy euphemism of "homebuilders", let's call them what they are - developers. As in "tax breaks for far cat developers."

One of the biggest builders in Texas, who would gain millions from this tax giveaway is Bob Perry of Perry Builders.

The very same Bob Perry who was the largest contributor to the Swift Boat slime campaign and a major backer of both Bush and Tom DeLay over the years.

Looks like his cash is paying off again.

Good work!

(except for that last assertion that Bourgeoisie Communists (D) are anti-corporate-welfare -- I'll need to see more evidence before I agree with that. I'm more convinced that the powerful help the powerful, and fuck the powerless.)

The home builders made great profits for a lot of years. They need no welfare from the government. If they squandered their profits and can no longer remain in business, they should be allowed to fail.

Mortgage holders whose homes have fallen in value more than they will recover during the life of their mortgages need help defaulting on their loans without future credit worthiness penalties. That is what Congress should address.

"and if Wall Street is going to get help"

typo?

Hmmm. I'm not sure. A comparative pittance to keep millions (or many thousands) of people from having their lives totally destroyed. Or taking the opportunity to call those people greedy and immoral for living in houses that are over-priced. Hmmm. Hmmm. I'm not sure.

Duh.

To protect a program from being exploited by the truly greedy and livin'-large, who are basically like their own little human-scale Enrons or Nationwide Lenders, why not simply set a cap on the amount of the loans or mortgages that will be given assistance? How about tax breaks for the first $90,000 or $150,000? By any normal standards, those would be decent-sized mortgages. But you wouldn't be underwriting the--okay, yes, "foolish"--lifestyles of people in McMansions with million-dollar mortgages.

Nope, just my reading comprehension.

A couple of points:

"Is it a good idea because lots of people are hurting and need help — and if Wall Street is going to get help, why not the little guys too? "

This issue is not being framed correctly. Why was Bear Stearns, that sterling example of financial responsibility, bailed out? Because letting it go under would have had a profoundly negative economic effect on a lot of innocent people. Why should homeowners facing foreclosure be bailed out? Because they are not the only ones facing negative economic consequences due to their actions. Foreclosures affect not just those who default on loans but the entire community in which they live. Communities where the overwhelming majority of people did nothing wrong. Why should people who bought homes they could afford and make their loan payments every month be subjected to economic blight when we can scrape together the resources to bailout the economy at large due to a handfull of irresponsible actors in the financial and construction industries?

"One of the bill's chief sponsors, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), called the measure 'a major, positive step in the right direction...'".

A quick trip to opensecrets.org (http://opensecrets.org/industries/recips.asp?Ind=C&cycle=2008) helpfully puts Dodd's enthusiasm in perspective. During the 2008 campaign cycle,Dodd has received $185,700 thus far from the construction industry.

"The technical term for this is a tax-loss carryback."

The somewhat less technical term is systemic corruption.

Chris Dodd seems to show an amazing amount of stupidity. Which fools elected that idiot?

Wow, if the House passed this, it's a shoe-in for the Senate. The Democrats in the Senate are even more spineless. Feinstein is probably drooling in anticipation of capitulation right now.

So the bill was sponsored by a Democrat, was passed by a Democrat-dominated Senate and Keven says its all fault of evil, corrupt Republicans.

What a stupid little person.

Matt wrote: Chris Dodd seems to show an amazing amount of stupidity. Which fools elected that idiot?

Perhaps the same pool of fools that elected Joe Lieberman?

so how deserving of assistance are the speculators, who have mortgages they can't afford and homes that are shrinking in value each day? especially considering they helped drive up prices in the first place? when it comes to making a buck, the "little guy" can be just as greedy as the big evil corporations.

and what about the thousands of people who work for the homebuilders and face losing their livelihoods if their employers go under? what did they do wrong? and the economic impact of those potentially lost jobs extends far beyond the housing sector.

i'm not sayin' that i favor tax breaks for the builders or "socializing losses" (a great term) as gross put it. i don't. nor do we need essentially government subsidies to build houses we don't need or that we reward builders who acted imprudently. just that the issues are complex and might require measures we might normally find distasteful. and if we do give the industry some help, that there is pay back required on the other end.

God Damn. This stuff just pisses me off. Homeowners who are headed into foreclosure had no business buying those houses that they couldn't afford in the first place and if they refinanced their way into poverty it isn't my problem as a taxpayer.

Nobody should get one f*cking dime of taxpayer money for being financially stupid and/or greedy.

No bailouts. For anybody.

I don't understand why the builders need tax breaks given that almost all of the foreclosures are directed at individual homeowners although I have seen the public notices of some local foreclosures directed at developers. Having said that, I don't see the argument about supply and demand affecting housing prices. Here in Huntsville, Alabama there are lots of large housing developments under construction in anticipation of BRAC movements into the city, but I can't see how the anticipated gain of 4 to 5k jobs justifies this housing boom. I also see absolutely no lowering of prices in the market. My feeling is that the bubble prick just has not reached my area, but the pain will be huge when it does happen!

Has anyone suggested letting the families that can't afford their mortgages rent their houses from the banks for two or three years, at market rents (or maybe rents that are keyed partly to their ability to pay)? That approach might stabilize the affected neighborhoods, keep the residents from being turned out onto the streets, prevent having too many houses on the market until housing recovers somewhat, and keep some money flowing to the mortgage holders without letting anyone completely off the hook. It might also keep the taxpayer from being suckered once again (though some might see that as a bug, not a feature).

Someone should point out that housing developments are a blight on the landscape (they always cut down every tree on the property), that the houses are aesthetically offensive & not well-made, and that new houses can drive down the price of existing houses. Here in Pittsburgh large new eyesores of housing compete in vain with more reasonably priced and located houses that offer trees, yards, privacy, and aesthetic diversity. So, no, we should not be subsidizing, or bailing out, the housing industry.

I think you are wrong Kevin. The lenders, brokers, and apraisers should be going out of business right and left. The builders did nothing wrong and should n't be wiped out just because everyone else was fucking up. Plenty of marginal builders will be going out of business even with the most generous tax break possible anyway.

Finally your general theory could be applied to everyone in any recession. I don't think you are always against say increasing unemployment benefit during recession.

This just in:

Congressional Democrats are spineless whimps who capitulate to Wall Street.

I'm shocked. Shocked!

I think Secular Animist hit the mark by labeling them "Republican lite." I'm glad Kevin quoted Gross. His succinct definition of the process -- "privatizing profits and socializing losses" -- applies not just to the homebuilder bail-out bill that passed the Senate, but also to Lehman Brothers and the investment banks now getting bailed out by the Fed's Freedom program, after years of windfall profits that ultimately yielded the sub-prime crisis and current financial meltdown.

Democrats have become Republicans and Republicans have become Fascists.

No, this is not a good thing. And, while many subprime buyers were hoodwinked, many others saw housing as an ATM machine and deserve to get burned just as surely as if they had stock-market losses.

As for Dems? They'll give in to the blackmail, for multiple reasons.

1. Campaign contributions for the general in November.
2. They're still spineless.
3. Many of them actually believe this is a good bill.

What BarryG said!

Of course, bailing out the individual homeowner would also bail out the big businesses. Call it the "trickle up" theory.

I have known a lot of small time developer/builders over the years. Every one of them, including some of the most successful in the country, have failed at one time or the other. It is just part of being in the business. In the past they have just started over. They must be thanking their lucky stars that Congress has decided to socialize their losses.

Our political system has become so corrupt you have to go all the way back to the late 1920s to find a parallel.

I not so sure this tax loss carry-back is such a terrible thing. It isn't just a handout. Companies have always been allowed to deduct losses from their income. It is just a matter of when. Currently they can only carry back for two years. The new rule will allow them to carry back for five years. Either way they get to deduct the loss. Under the old rules they might not have paid enough taxes in just the last two years to exhaust their carry-back so they would have to wait until future years to get get their deduction. If they went out of business, they might never get the deduction. The new rule just allows them to recover their losses sooner. They still end up paying the same amount of taxes eventually.

Once again, our political masters complicate the issue and help the wrong people.

I see two separate groups being lumped together here: dwellers of EXISTING homes who are threatened with foreclosure and the developers whose market for UNBUILT homes is fast disappearing.

Couldn't the first group be helped with some creative refinancing with the govt. subsidizing whatever the brokers and banks might lose from the new arrangements. This way families are held together and communities remain stable.

As for the second group, how are building subsidies going improve a market downturn? As someone above me said, more unsold houses = further price slumps. Someone needs to pull the plug and let the situation normalize.

The developers will be able to ride this out. Maybe the bailout dollars would be better used by putting all those laid-off construction people back to work repairing the country's infrastructure.

The most expensive item is a tax break for homebuilders and other money-losing businesses that would cost the federal government more than $25 billion over the next three years.

If they are losing money, what taxes are they paying? It sounds as though something important has been omitted from the description of the bill. Probably the reason that Chris Dodd supports it, and the reason that Democrats do not oppose it, has been omitted entirely.

from the original WaPo : Dodd and his GOP counterpart on the Banking Committee, Sen. Richard C. Shelby (Ala.), quickly hammered out a compromise that abandoned the bankruptcy provision. That measure yesterday passed by a vote of 84 to 12, with a group of mostly staunch conservatives voting no.

It does not sound as though the Democrats caved in to blackmail.

Were we not pissing $12 billion a month down our legs in Iraq, a bailout for homeowners would be child's play. This legislation is the most pernicious form of corporate welfare. It is time for the Democrats to propose a new New Deal. If the last eight years have proven nothing else, it is that "trickle-down", endless tax cuts for the rich economics is an utter and complete failure.

The time is now for the Democrats to prove once again, that government can be a force for good and repudiate Ronald Reagan's myth that "government is the problem" once and for all.

Right you are, Kevin Drum.

I read today in Parade Magazine that a 2004 GAO study found that "61% of American corporations, including 39% if large companies, paid no corporate income taxes between 1996 and 2000." It also said that "Last year, corporations shouldered just 14.4% of the total U.S. tax burden, compared with about 50% in 1940."

http://www.parade.com/articles/editions/2008/edition_04-13-2008/Intelligence_Report#newsmakers

Those of you who have been following this will know that mortgage brokers systematically directed people towards much higher paying, more expensive mortgages than they might have otherwise found from a bank, given their credit rating. And for obvious, incentivised reasons.

If we can do a "tax loss carry-back" for buidlers we should certainly be able to have an income loss carry-forward for all these rip-off artists that practised these last years. No reason they should get to walk away with misgotten millions. The stories tell all too clearly of bait-and-switch tactics and deceptive selling.

Nothing new here in the US, but, for some reason, the laws only seem to apply to car sales.

The lesson here is this: Republicans will never give up. No matter what the problem at hand is, the solution is a corporate tax break of some kind.

And so the ultimate solution should be to eliminate the corporate income tax, raise the marginal rates on individual side to whatever it requires to offset, and make all personal income tax for any given person the same rate regardless of the source.

It's like how vegetarians are not particularly affected by mad cow.

Brian,

Helping people stay in houses they can't afford keeps those houses off the market a bit longer, which keeps the balance of supply and demand a little less lopsided on the supply side. But mostly it is just delaying the inevitable, and it is just throwing good money after bad. It props up the prices by slowing down the downward trend.

From 2008 on in, if YOU want REPRESENTATION ON YOUR TAXATION, why YOU'll just have to REPRESENT YOURSELF.

The rich will always be with us. They are to get all the benefits bestowed upon the poor and then some. They get Social Security, even if they don't really need it, as part of the bargain for allowing legislation to help the poor. FDR knew this. This is part of the legislative compromise. The rich get their privileged protections while the poor get a modicum of aid. This protects the rich from becoming the poor after their risky investments visit ruin upon the rich and poor alike.

In a democracy, the rich and poor alike can find shelter under a freeway overpass, to paraphrase Anatole France.

"The lesson here is this: Republicans will never give up....Democrats need to stop giving in to this blackmail."

Isn't it time we realized there is no pure party, only politicians who either work for or against the American people? And by "people," I mean the majority, not the members of the oligarchy who are admittedly, genetically considered people.

In other words, vote for the candidate who not only talks the talk, but walks the walk. Although past performance does not necessarily guarantee future earnings, the country might be better served if we elect someone who has earned the position. We can't get a damned thing done until our politicians care about the future of the country more than the future of their bank balances and/or careers.

One of the things the Apartheid South African government did to ensure furtherance was to pit the blacks against each other by depositing them in 10 Bantustans ("homelands") and letting them fight it out for resources. Americans have to stop squabbling amongst themselves and start thinking about how current politics are destroying our Founders' vision.

As Kennedy said, it's not what our country can do for us but what we can do for our country. It's time to step up to the plate and quit being spoiled, meme-directed brats.

The way to help overextended borrowers while allowing home prices to fall to reasonable levels is to allow cramdowns for primary residences in bankruptcy.

For those who don't want to go the bankruptcy route, either the bank should forgive that part of the loan which exceeds the current value of the house, or the borrower should walk away.

All three options will force prices down further.

Losing a home is not the end of the world. In fact, with the loans many people are in, they will be better off, in both the short and long term, by letting the home go; at this point, homes are not an asset but a millstone around the necks of many families, especially those who bought in the last few years.

People act as if renting is the end of the world. It's not. Homelessness is. And people are not going to become homeless because they can't afford a $4000/month mortgage. With prices what they were when most of these people bought, they'll be able to rent equivalent digs for half their mortgage payment.

Trying to prop up home prices that are an absurd multiple of incomes (or rents) is foolish, and it's bad for families who will need to buy in the future.

And it probably won't work anyway. Instead, it might just draw out the process of decline in prices, pushing any recovery of the housing sector out several more years. And that won't be good for the economy, will it?

What they should do is look at the people going into foreclosure, figure what they can really pay each month, convert that into a loan amount, have the government put a second mortgage on the property to make up the difference with no interest and payment of equity on sale of loan. The second would be deducted from the lenders equity as part of a bail out.

Here's the problem. Two words.

MORAL HAZARD

I'm willing to bet that 90% of the economic advisors in D.C. think bailing out homeowners is a bad idea, for that reason. If we bail out homeowners, then others in the future will make bad market decisions, which makes the problem worse. There needs to be repercussions for bad actions, after all.

Err..but what about the corporations?

There's no moral hazard risk because they're already beyond it. There's no rational reason for the modern corporation to act in any sort of conservative (not political, talking financial) manner. All the rewards go to the risk-takers. It's about short-term gain, ignoring any long-term pain.

There's also an over-emphasis on the importance of the financial sector, which is fully based on faulty models created in the modern economic community. Did I say faulty? I meant broken. It tends to way overpush the supply-side of things, while ignoring that 95% of the economy is actually demand based.

Corporations have been personified and no longer operate under charters. Many pro-corporate voices are saying that people shouldnt get government bailouts. Yet, theses personified corporations are getting bailouts. WTF?

Seems to me the corporate whores want it both ways,

Conflicted? Seriously?

This bill is horrid. It needs to die. Amending it to help people facing foreclosure will only make it more horrid.

...eliminate the corporate income tax, raise the marginal rates on individual side to whatever it requires to offset, and make all personal income tax for any given person the same rate regardless of the source.

Agreed. I would also change the mortgage interest deduction so it can only be applied to primary residences.

"Democrats need to stop giving in to this blackmail. Let 'em filibuster for the grand cause of the extended tax-loss carryback if they want. The rest of this bill isn't worth caving in on this, and we have to start fighting back against this kind of lunacy eventually. Why not now?"

Why not now? Because, as Dana Milbank recently reported, democrats on the Senate Banking Committee are just as beholden to banking and investment house interests as are the republicans. The democrats have been bought and paid for, just as have been the republicans.

http://twp.com/detail.jsp?key=212676&rc=dana_po&p=1&all=1

Congress, over the years, has replaced the unseemly practice of envelopes stuffed with cash with a system of legal bribery.

the reason the homebuilders got their big tax break was blackmail. the builders pac cut off contributions to congress last month. congress couldn't let that stand.

Source: BIG BUILDER News
Publication date: February 13, 2008

The National Association of Home Builders, angered by the dropping of several key provisions it lobbyed for in the recently passed economic stimulus package, has decided to hit members of Congress where it hurts most: at the trough where they gorge on handouts from Political Action Committees.

The NAHB has cut them off.

The NAHB was the third-largest contributor to federal candidates during the 2006 election cycle, according to opensecrets.org, which tracks data from the Federal Election Commission. During that cycle, it spent $2.9 million, with 73% going to Republicans and 26% going to Democrats.

"Today, the National Association of Home Builders' Political Action Committee, BUILD-PAC, and its 150-member Board of Trustees representing all 50 states, agreed to cease all approvals and disbursements of BUILD-PAC contributions to federal congressional candidates and their PACs until further notice," said Brian Catalde, president of NAHB, on Tuesday. "This extraordinary action was taken because the NAHB BUILD-PAC Board of Trustees felt that over the past six months Congress and the Administration have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward. Housing and related industries account for more than 16% of the Gross Domestic Product. More needs to be done to jump-start housing and ensure the economy does not fall into a recession."

Letting builders compete in the marketplace is corporate Darwinism. We should be thinking in terms of human capital--replacing high wage Mexican illegal alien construction workers with hard working Haitian and African workers who do not demand such high wages.

In light of predictions that we're facing another Great Depression, how can we NOT push large sums of money into the housing industry and banks which also participate in that?

In light of the fast-rising costs of commodities, such as housing construction products (wood, wire, copper, etc.), how can we not promote more housing construction at this time?

In light of the already depressed economy which depends upon a lot of consumption, how can we not help people to work at good paying jobs (in housing as well as elsewhere)?

In light of the damage that has and can continue to be done to families who have and might lose their homes, does it not behoove us to help re-jigger mortgages to fixed-rates and help people stay in their homes (if they want)?

I don't know the numbers enough to comment on whether $25B is too much or too little. I'm pretty comfortable leaving it to people like Dodd and Frank to settle on a good compromise.

In normal times this kind of bill would be abhorrent, but in these times can we afford to ignore the housing industry?

It's true that such specific tax breaks shouldn't be given to losing industries. (I'm disappointed in Dodd, whom I have tended to admire and thought would make a good President.) But "loss" itself, as directly defined, should be fully available to offset income since it represents "negative income." I mean, even to be "banked" from one year to another without restriction.

In light of the already depressed economy which depends upon a lot of consumption, how can we not help people to work at good paying jobs (in housing as well as elsewhere)?

These comments don't ring especially true for housing construction since that segment of the construction industry has pretty much been taken over by illegal immigrants in many sections of the country. Housing construction wages are lower than they were ten years ago which reflects the skill levels of the workers being employed and a good portion of the wages being paid go 'back home' to central America rather than staying in the US to stimulate the local economies. Not intending to bash immigrants; just stating the facts, at least in Texas.

This bill is typical of most recent economic stimulus packges. the only way those at the bottom can get a little is give give a lot to those at the top. trickle, trickle, trickle. or is it drip, drip, drip?

The housing industry has plenty of houses coming onto the market because of foreclosures. I have actually heard some investor types wanting the foreclosed homes to be bulldozed to maintain the value of owned homes...

Also, i would take not that some 241 lending/mortgage companies failed before too big to fail Bear Stearns was bailed out.

I heard Sen. Bernie Sanders mention this on the Thom Hartmann show the other day. He said that the dems in the Senate voted for the bill in this form knowing that the House version did not have this particular bailout and that they felt that the bill that came out of negotiations after passing both houses would be much more appealing to Democrats. Because of the slim margin they have in the Senate this was the only way they could bring the bill up for a vote. Interesting idea. We'll see if it pans out.

This proposed legislation should be entitled the "Suburban Sprawl Subsidy". Because the overwhelming majority of housing developers it will benefit are those building on 'greenfields', not those redeveloping close to mass transit and other exisiting infrastructure, other taxpayers will be bailing out developers who have done us and our environment the most harm.