This article provides excellent historical context to presidential approval ratings in general and President Obama's predicament in particular. While the author poohs poohs any concern over the president's political fortunes at this stage, I found one of his disclaimers/footnotes to be very interesting:
Let me add a bit more nuance here: I think you can make a good (although probably not rock-solid) case that the idea of a substantially progressive Obama presidency is on the line right now. But there are a lot of scenarios where the combination of voters getting a little something out of their system in 2010, combined with (eventually) an improving economy and perhaps a foreign policy success or two, could leave Obama personally in fairly good shape in 2012
In essence, Silver sees no cause for the White House to have immediate concern that they will be looking for new jobs come 2013. However, the change liberals hoped for may be DOA.
Before Republican types rejoice, never forget the lessons of Bill Clinton. His pivot to the center salvaged his administration.
Tuesday, January 26, 2010
Thursday, January 21, 2010
The Mortgage Market Tightens
The Federal Housing Administration announced today a tightening of its lending standards for borrowers.
A little background is in order. The FHA provides an alternative financing option for borrowers who are short on cash. While private market lenders historically expected down payments in the 10-20% range of the sale price, the FHA underwrote loans with down payments of 3.5%. FHA interest rates are very competitive.
The agency has an interesting and pivotal history itself. Founded in 1934 as part of the New Deal, the FHA primed the housing market and accelerated middle class wealth accumulation and home ownership. Basically, the agency does not fund loans as much as it indemnifies private lender against default. This makes the agency carries out a credit insurance function as opposed to a banking function. Bankers traumatized by the collapse of the American financial system were suddenly incentivized to lend since the government covered their losses.
Additionally, the FHA did not spend tax dollars. Borrowers paid for the insurance as part of their closing costs and monthly payments. This is similar to mortgage insurance for those readers who own a home.
Prior to the FHA, bankers required borrowers to bring 50%-60% of the sale price to the closing table. Loans typically lasted five years and included a balloon payment which forced homeowners to scurry to the nearest lender and re-finance. The FHA changed this reality permanently by requiring willing and conforming lenders to fiance borrowers for 20 years with reasonable interest rates. This allowed middle income Americans to enter the housing market which created a real estate explosion.
While the FHA is still very much a significant player in the housing market, the agency simply cannot afford to underwrite loans for questionable borrowers absent some assurance of re-payment. This reality forced the FHA to increase the down payment to 10% for some borrowers with low credit. This move could significantly affect the housing market since 40% of all current mortgages are FHA paper.
One final note-bankers in the 1930's and 1940's were still leery of doing business with the FHA. specifically, the 20 year term (which eventually became 30 years) scared many lenders. While the mortgage insurance against default was nice, 20 years was a long time to tie up capital. enter the Federal National Mortgage Association or Fannie Mae. Fannie Mae paid lenders cash for their existing loan which allowed the banking industry to increase the churn rate of capital. This churn provided more money to lend and contributed to the American real estate explosion.
What are the lessons here? Both the FHA and Fannie Mae have changed the way they do business. of course, Fannie Mae has bigger problems than the FHA. Also, remember these lessons when the banking industry cries fouls over government regulation and interference. The government they criticize for limiting their wealth options actually played a large role in creating the modern real estate market.
A little background is in order. The FHA provides an alternative financing option for borrowers who are short on cash. While private market lenders historically expected down payments in the 10-20% range of the sale price, the FHA underwrote loans with down payments of 3.5%. FHA interest rates are very competitive.
The agency has an interesting and pivotal history itself. Founded in 1934 as part of the New Deal, the FHA primed the housing market and accelerated middle class wealth accumulation and home ownership. Basically, the agency does not fund loans as much as it indemnifies private lender against default. This makes the agency carries out a credit insurance function as opposed to a banking function. Bankers traumatized by the collapse of the American financial system were suddenly incentivized to lend since the government covered their losses.
Additionally, the FHA did not spend tax dollars. Borrowers paid for the insurance as part of their closing costs and monthly payments. This is similar to mortgage insurance for those readers who own a home.
Prior to the FHA, bankers required borrowers to bring 50%-60% of the sale price to the closing table. Loans typically lasted five years and included a balloon payment which forced homeowners to scurry to the nearest lender and re-finance. The FHA changed this reality permanently by requiring willing and conforming lenders to fiance borrowers for 20 years with reasonable interest rates. This allowed middle income Americans to enter the housing market which created a real estate explosion.
While the FHA is still very much a significant player in the housing market, the agency simply cannot afford to underwrite loans for questionable borrowers absent some assurance of re-payment. This reality forced the FHA to increase the down payment to 10% for some borrowers with low credit. This move could significantly affect the housing market since 40% of all current mortgages are FHA paper.
One final note-bankers in the 1930's and 1940's were still leery of doing business with the FHA. specifically, the 20 year term (which eventually became 30 years) scared many lenders. While the mortgage insurance against default was nice, 20 years was a long time to tie up capital. enter the Federal National Mortgage Association or Fannie Mae. Fannie Mae paid lenders cash for their existing loan which allowed the banking industry to increase the churn rate of capital. This churn provided more money to lend and contributed to the American real estate explosion.
What are the lessons here? Both the FHA and Fannie Mae have changed the way they do business. of course, Fannie Mae has bigger problems than the FHA. Also, remember these lessons when the banking industry cries fouls over government regulation and interference. The government they criticize for limiting their wealth options actually played a large role in creating the modern real estate market.
Wednesday, January 20, 2010
The Massachusetts Miracle
The Democrats and the Obama Administration suffered another stinging defeat yesterday in Massachusetts of all places. This is the same state that last elected a Republican Senator in 1979 and provided the current president a comfortable margin of 26% in November of 2008. Massachusetts is simply among the bluest of blue state.
So, what happened? How or why did a little known local politician with scant political resources take Edward Kennedy's seat from the Democrats?
True to its moniker, special elections emerge via special circumstances. Typically, an incumbent resigns or passes away while in office. While these circumstances might well alter the political environment, the comparative brevity is the real equalizer in special elections. For example, This campaign had a six week election cycle. Normal election cycles run 9-10 months and even longer for big races.
Basically, Scott Brown had enough money and momentum to thrive for six weeks. Additionally, this time-frame limited the effectiveness of TV ads while also simply reducing available air-time. A candidate with less name recognition like Brown also benefits from the short cycle since the favored candidate's campaign has less time to conduct opposition research.
Bottom line, moderate voters are worried about the economy, health care, Iraq and the corrupt banking system. People simply do not think President Obama is moving in the right direction on these issues.
What Happens Now?
The results from Tuesday create endless questions and numrerour blogging opportunites for me. The following questions flow from last nights head shaker:
So, what happened? How or why did a little known local politician with scant political resources take Edward Kennedy's seat from the Democrats?
- Special Elections often Create special/memorable results
True to its moniker, special elections emerge via special circumstances. Typically, an incumbent resigns or passes away while in office. While these circumstances might well alter the political environment, the comparative brevity is the real equalizer in special elections. For example, This campaign had a six week election cycle. Normal election cycles run 9-10 months and even longer for big races.
Basically, Scott Brown had enough money and momentum to thrive for six weeks. Additionally, this time-frame limited the effectiveness of TV ads while also simply reducing available air-time. A candidate with less name recognition like Brown also benefits from the short cycle since the favored candidate's campaign has less time to conduct opposition research.
- The National Political Context
Bottom line, moderate voters are worried about the economy, health care, Iraq and the corrupt banking system. People simply do not think President Obama is moving in the right direction on these issues.
- The Blame Game
What Happens Now?
The results from Tuesday create endless questions and numrerour blogging opportunites for me. The following questions flow from last nights head shaker:
- What happens to Congress in November? Can the GOP re-gain control of both chambers?
- Do rank and file Republicans truly desire a new majority?
- How does this affect our expectations for 2012?
- What must the Democrats do to get out of this rut?
- What must Republicans do to keep them in the rut?
Wednesday, January 13, 2010
helping Haiti
Does anyone have a recommendation for how to help the people in Haiti following the devastating earthquake of 1/12/10?
I am looking at ticket prices and it seems that a weekend trip there would cost about $1200 departing Friday evening, arriving Saturday morning, then leaving Haiti Monday night and arriving back in Dallas Tuesday morning. Does anyone have an experience in doing this kind of relief work? Any comments on whether you think one or two people traveling there could make a difference and be helpful in any practical way?
We definitely need to pray for the relief efforts there, but perhaps there is more that we, Christians living in the US, can do. No matter what else globalization does, one thing that it allows us to do is go and help quickly, we only need will to do it.
Friday, January 1, 2010
When the Jobs Were Lost
A very cool (and depressing) interactive map that tracks monthly job losses by county from 2007-2009. Note that certain regions such as the Midwest felt the pain earlier than the rest of the country. However, bubble states like California and Arizona faced major employment losses as the recession picked up steam. In fact, the financial and banking crisis nailed both the East and West Coast. Granted, no region was completely immune.
Obama's Eye on Intelligence
Americans enter 2010 again questioning whether our government is keeping us safe. President Obama is determining whether intelligence personnel is fully sharing information.
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