Lets mail the working stiff a one time $300 check, while we give $150K and a hall pass to the buyers and banks that got us into the mess.

Where’s the beef? The pea is under the pod called the GSE loan limit increase from $417K to $729K for one year.

The more stringent FNMA, FHLMC limits are raised for one year, while the less stringent FHA limits are raised, permanently.

According to California Sen. Barbara Boxer’s office:

On the average $650,000 jumbo loan balance, a 30-year fixed rate mortgage, the lower rate (-1%) on the “conforming” GSE jumbo would result in an average $417 per month savings, every month for 30 years!

Thats a $150K subsidy which amounts to white collar welfare for rich homeowners and speculators.

Millions of 1, 2, 3 & 5 year interest only & teaser jumbos will be reset this year. Calculations estimate if only 1 million default after a FHA refi, this will result in a $260 billion cost to the taxpayer within 2 years.

There is nothing preventing Countrywide and other lenders from refinancing their delinquent and defaulting “liar loans” with the GSE’s under this program.

In effect tax payers will be subsidizing the banks and borrowers with non conforming jumbo loans: California 35%, New York 19.5%, New Jersey 13,5% & DC 21.5%

This stimulus package is despicable, digusting, a disaster and a disgrace. Should it pass and be signed into law as currently drafted, its constitutional legality needs to be tested.

At a minimum, it is a violation of the GSE charters infringing into the “primary” mortgage markets. I urge you to contact your House & Senate reps to have the loan limit increase provision stricken from the bill.

http://naybob.blogspot.com/2008/01/barney-frank-hr-1852-sb-2338-economic.html

CPI is over 4% and dallas fed prez — “I have no intention of being party to any action that might shake faith in the dollar.” — fisher has advocated trimmed-mean measures (as opposed to core)…

http://www.dallasfed.org/data/pce/index.html
http://www.clevelandfed.org/research/inflation/us-inflation/mcpi.cfm

…all of which are accelerating, or as ned davis points out: “those who use “core inflation” argue it is more accurate since it does not include the monthly swings in food and energy, which can be volatile. If it is just month-to-month distortions, why has year-to-year Personal Consumption Expenditure (PCE) inflation been above core PCE inflation for 57 out of the last 63 months (90%)?”

“…trading in goods from China was extremely lucrative for Europeans and Chinese merchants alike. Due to the Qing Dynasty’s trade restrictions, whereby international trade was only allowed to take place in Canton (Guangzhou) conducted by imperially sanctioned monopolies, it became uneconomic to trade in low-value manufactured consumer products that the average Chinese could buy from the British like the Indians did. Instead, the Sino-British trade became dominated by high-value luxury items such as tea (from China to Britain) and silver (from Britain to China), to the extent that European specie metals became widely used in China. Britain had been on the gold standard since the 18th century, so it had to purchase silver from continental Europe to supply the Chinese appetite for silver, which was a costly process at a time before demonetization of silver by Germany in the 1870s. In casting about for other possible commodities, the British soon discovered opium, and production of the commodity was subsidized in British India. Between 1821 and 1837 imports of the drug to China increased fivefold, as the demand for the equalizing of the trade balance reversed a previous decision by the British authorities to respect the Qing government ban on the drug…”

sound familiar?

bsetser:
“..guest — be careful, the US cannot keep other countries from buying fx to hold their exchange rate down, but it could either:
a) restrict domestic demand growth through policy, hurting the us and the world or
b) impose tariffs on countries that consistently resist exchange rate appreciation. ..”

commentary:
c) impose tariffs on countries that doe not have international standards for production- and labor stuff: environement protection, pension-fond, health/accident-insurance, …

Yes. There are a lot of different possibilities and all of those can be explained in very rational ways.

“..hurting the us and the world..”
“..i am obsessed with the end game..”

commentary:
Yes, that is the price.
I believe, we all have to pay the price: now or later.

Or is there a way out through the winning of time?
What is needed in the capitalistic game, is a next solvent borrower to create the next bubble.
But there is nobdy and nothing? Endgame?

“..both would take matters into the united states hands. both also are non-cooperative acts. ..”

commentary:
Good point.
Means in reality: all will adjust and optimise their own portfolio; restriction here/there and everywhere.

“.. one of the biggest puzzles to me is why the rest of the world has been willing to subsidize W’s foreign policy by buying up all the treasury bonds that have been issued to finance it. again, the world has a vote here — they don’t have to do this. tis China and the gulf’s choice to peg to the $ and hold so much of their savings in $. ..”

commentary:
Maybe:
a. for Oil-princes: in times, where “econ-earthquakes” could quickly emerge, there is the situation, where US is a “save heaven”, in an environement of tumbeling countries (econ. and political)?
b. for China: they buy, because they want, that the machine is going on. Their total-calculation seems to be positive?

globumedes
ps. what I find am most asthonishing:
A devlopping country (GDP 07 ~3.195tril) can really play cards with the US (GDP 07 ~14tril.).
What went “wrong” for the US?

How droll. It surprises you that US profligacy seems to undermine international capital markets, perversely depressing interest rates to sustain the unsustainable. This is because you have nothing but contempt for our traditional American conservative family values such as Kinder, Küche, Kirche und most importantly, Kipper- und Wipperzeit. In our neo-Holyroman empire, we are preparing for a new and better 30 Years’ War, with our fierce Beltway Tross and Landsknechte, so naturally we must debase all currencies in the traditional fashion before undergoing the traditional famines, massacres, and plagues. Having subjected citizens to fanatical sectarian polarization, and consumers to a Schwedischen Trunk of soft credit, true believers must now defenestrate the foul heretics of the Setser blog.

I agree re that there has been a glut in CB demand for some particular kinds of treasuries, but the underlying source of that demand sure seems to be connnected with the rise in savings (v investment) in the big savings surplus countries — i.e. China and the oil exporters. both have seen savings rise faster than investment, and both now have negative real rates (domestically) as well. that seems fairly savings glut like to me.

guest — be careful, the US cannot keep other countries from buying fx to hold their exchange rate down, but it could either:

a) restrict domestic demand growth through policy, hurting the us and the world or
b) impose tariffs on countries that consistently resist exchange rate appreciation.

both would take matters into the united states hands. both also are non-cooperative acts.

gillies — i am obsessed with the end game because i worry we are heading there quickly; there are plenty of signs of growing stress in the global economy.

but one correction; the CIC was set up to raise RMB financing from domestic chinese savers and invest the proceeds in USD and euros. that is a policy choice, one that i think should be questioned.

one of the biggest puzzles to me is why the rest of the world has been willing to subsidize W’s foreign policy by buying up all the treasury bonds that have been issued to finance it. again, the world has a vote here — they don’t have to do this. tis China and the gulf’s choice to peg to the $ and hold so much of their savings in $.

i like the red star bernanke analogy by the way. it captures in a single image the two forces that have pushed us rates down.

sitting on a trillion cash and watching to guage the bottom of a bear market ? some people have all the fun. if those guys lie awake at night it is with sheer excitement.

all they need do now is buy a few billion yen and wrongfoot the carry traders, then move in and buy up everyone in the casualty ward.

and by the way – we know where bernanke gets his confetti. – there’s a red star on his helicopter.
.