POLITICS

Morning Examiner: The Obama campaign to reinflate the bubble

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Politics,Beltway Confidential,Conn Carroll

Real estate is back. Over the past 12 months, home prices in California have risen by 25 percent. Fannie Mae not only reported its first profit in six years in 2012, it was $17.2 billion in the black. That is its largest annual profit ever.

Wall Street is getting in on the action, too. Where Countrywide Financial was the go to mortgage lender in the 2000s, Wells Fargo has decided to be the mortgage king of the 2010s. The bank’s mortgage unit produced $524 billion last year, the largest annual total ever for one lender and greater than the output of the next five largest lenders combined.

Hedge funds are also pouring billions into the real estate market, too. With the federal reserve printing over $85 billion in new cash every month, the wealthiest 1 percent in America are desperate for investments that can give them a decent return on their money. Hedge funds are buying foreclosed or distressed properties, turning them into rental units, and making huge profits.

Hedge fund firm Farallon Capital Management, whose billionaire owner Tom Steyer is hosting a $35,000 a plate fundraiser for President Obama tonight, is even promising its investors a 20 percent internal rate of return on its latest real estate fund.

But all this Fed-fueled cash pouring into the real estate market is pricing out middle- and lower-income home buyers. “I’ve never seen it like this before,” Los Angeles real estate agent Leo Nordine told The Los Angeles Times. “There are so many investors buying right now it’s insane. The top 1% is buying up all the real estate.” And California is not alone. In Phoenix, 25 percent of all the region’s homes are now owned by investors, according to an Arizona Republic analysis. And just outside the Capitol in Prince George’s county, investors accounted for one-third of all home sales last year.

Obama could put a stop to all this by pressuring the Fed to stop printing so much money. But the Fed’s printing press is the only thing keeping Obama’s pathetic economic recovery from collapsing entirely.

So instead, Obama is going to use the government to intervene in the economy even further. Like President Bush before him, Obama “is engaged in a broad push to make more home loans available to people with weaker credit,” The Washington Post reports today. “Administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default,” The Post reports.

But what happens if the Fed stops or slows its printing press and real estate suddenly becomes less of an appetizing target for the Tom Steyers of the world? Might real estate prices fall again? And then who would get stuck paying for all those mortgages for all those homes people with bad credit bought with little to no down payment with help from the government?

That’s right you.

Before Fannie Mae began posting record profits last year, tax payers spent $187 billion bailing it, and Freddie Mac, out. But those are the types of wild cash flow swings voters can expect to continue if the keep voting big government Democrats into the White House.

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The Wall Street Journal, Fannie’s Windfall Blurs Debate Over Its Fate: Fannie Mae reported 2012 net income of $17.2 billion on Tuesday, its largest annual profit ever and first in six years, potentially reshaping the political debate over the fate of the government-controlled mortgage-finance firm.
The Washington Post, Obama administration pushes banks to make home loans to people with weaker credit: The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.
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The Hill, UN approval of arms trade treaty sets up Obama, Senate showdown: The Obama administration defied a majority of the Senate on Tuesday by voting to approve a United Nations treaty on the trade of small arms and other conventional weapons.

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