WASHINGTON (AP) - President Barack Obama's assurance Tuesday that his mortgage-relief plan will only benefit deserving
homeowners appears to be a stretch.
Even officials in his administration, many supporters of the
plan in Congress and the Federal Reserve chairman expect some of
that money will go to people who should have known better than to
buy that huge house.
The president glossed over a number of complex realities in
delivering his speech to Congress and a nation hungry for economic
A look at some of his assertions:
OBAMA: "We have launched a housing plan that will help
responsible families facing the threat of foreclosure lower their
monthly payments and refinance their mortgages. It's a plan that
won't help speculators or that neighbor down the street who bought
a house he could never hope to afford, but it will help millions of
Americans who are struggling with declining home values."
THE FACTS: If the administration has come up with a way to
ensure money does not go to home buyers who used bad judgment, it
hasn't announced it.
Defending the program Tuesday at a Senate hearing, Federal
Reserve Chairman Ben Bernanke said it's important to save some of
those people for the greater good. He likened it to calling the
fire department to put out a blaze caused by someone smoking in
"I think the smart way to deal with a situation like that is to
put out the fire, save him from his own consequences of his own
action but then, going forward, enact penalties and set tougher
rules about smoking in bed."
Similarly, the head of the Federal Deposit Insurance Corp.
suggested this month it's not likely aid will be denied to all
homeowners who overstated their income or assets to get a mortgage
they couldn't afford.
"I think it's just simply impractical to try to do a forensic
analysis of each and every one of these delinquent loans," Sheila
Bair told National Public Radio.
OBAMA: "We have already identified $2 trillion in savings over
the next decade."
THE FACTS: Although 10-year projections are common in
government, they don't mean much. And at times, they are a way for
a president to pass on the most painful steps to his successor, by
putting off big tax increases or spending cuts until someone else
is in the White House.
Obama only has a real say on spending during the four years of
his term. He may not be president after that and he certainly won't
be 10 years from now.
OBAMA: "Regulations were gutted for the sake of a quick profit
at the expense of a healthy market. People bought homes they knew
they couldn't afford from banks and lenders who pushed those bad
loans anyway. And all the while, critical debates and difficult
decisions were put off for some other time on some other day."
THE FACTS: This may be so, but it isn't only Republicans who
pushed for deregulation of the financial industries. The Clinton
administration championed an easing of banking regulations,
including legislation that ended the barrier between regular banks
and Wall Street banks. That led to a deregulation that kept regular
banks under tight federal regulation but extended lax regulation of
Wall Street banks. Clinton Treasury Secretary Robert Rubin, later
an economic adviser to candidate Obama, was in the forefront in
pushing for this deregulation.
OBAMA: "In this budget, we will end education programs that
don't work and end direct payments to large agribusinesses that
don't need them. We'll eliminate the no-bid contracts that have
wasted billions in Iraq, and reform our defense budget so that
we're not paying for Cold War-era weapons systems we don't use. We
will root out the waste, fraud and abuse in our Medicare program
that doesn't make our seniors any healthier, and we will restore a
sense of fairness and balance to our tax code by finally ending the
tax breaks for corporations that ship our jobs overseas."
THE FACTS: First, his budget does not accomplish any of that. It
only proposes those steps. That's all a president can do, because
control over spending rests with Congress. Obama's proposals here
are a wish list and some items, including corporate tax increases
and cuts in agricultural aid, will be a tough sale in Congress.
Second, waste, fraud and abuse are routinely targeted by
presidents who later find that the savings realized seldom amount
to significant sums. Programs that a president might consider
wasteful have staunch defenders in Congress who have fought off
similar efforts in the past.
OBAMA: "Over the next two years, this plan will save or create
3.5 million jobs."
THE FACTS: This is a recurrent Obama formulation. But job
creation projections are uncertain even in stable times, and some
of the economists relied on by Obama in making his forecast
acknowledge a great deal of uncertainty in their numbers.
The president's own economists, in a report prepared last month,
stated, "It should be understood that all of the estimates
presented in this memo are subject to significant margins of
Beyond that, it's unlikely the nation will ever know how many
jobs are saved as a result of the stimulus. While it's clear when
jobs are abolished, there's no economic gauge that tracks job
preservation. The estimates are based on economic assumptions of
how many jobs would be lost without the stimulus.
OBAMA: "First, we are creating a new lending fund that
represents the largest effort ever to help provide auto loans,
college loans and small business loans to the consumers and
entrepreneurs who keep this economy running."
THE FACTS. Obama appeared to be referring to an expanded Federal
Reserve program established in the Bush administration but never
activated. The program would unclog consumer lending, allowing the
Fed's program to expand to $1 trillion from $200 billion. The Fed
said it will lend the money to banks and other financial
institutions in order to spur more lending by those companies
through credit cards and student and auto loans.
Associated Press writer Tom Raum contributed to this story.
(Copyright 2009 by The Associated Press. All Rights Reserved.)