The Bush administration has got to get its story straight.
On several occasions now, including as recently as last Thursday’s hearing in front of the House Financial Services Committee, Housing and Urban Development Secretary Alfonso Jackson has explicitly stated that administration policy is not intended to help so called “Yuppies”.
Yet, with their now uniform acceptance of the “temporary” conforming loan limit increase, that’s exactly Senator Schumer, Representative Frank and a reluctant Bernanke, Paulson and Jackson seem bent on doing.
In an interview with Bloomberg last July, Secretary Jackson initially made his anti-yuppie bailout position.
“We have very educated people that decided that they wanted to live above their means, and we call them yuppies… young people who wanted a Mercedes Benz but at the same time wanted a $600,000 home. So, they go in and make a loan that is basically interest only wake up the next morning and they can’t cover the note because the house has not increased [in value]… In those cases, we are not willing to bail those people out. But low and moderate income people, fireman and police who didn’t read the fine print, we will be able to help them stay in their home.”
Again, during the press conference preceding the “bailout” conference with all the national homebuilders that occurred earlier this month, Jackson reiterated his anti-yuppie stance.
“… this is a limited market we are trying to save. We’re not here to save those persons who made those huge exotic loans, which I call yuppies, We’re here to look at middleclass Americans.”
Then again, at last week’s committee hearing, Jackson stated that yuppies were not on the list to be saved.
“Let me say this to you mister chairman, clearly there are some people that we are not going to be able to help. Especially, as I always say, the yuppies who had this extravagant decision to have two or three cars, and a huge house they can’t afford but the people we are looking at are basically middle income people, fireman… police, teachers, nurses.”
So, I would think the point has been made very clearly… No Yuppie Bailout!
Yet, with the proposed conforming loan limit increase to $625,000 for the more expensive “urban” areas, it’s obvious that, by its definition, the yuppie and his or her lender is being bailed out.
Who else lives in the expensive metro markets and borrows $625,000 toward their home purchase anyway… fireman, police and nurses?
It’s important to keep in mind that the main proponents of the conforming loan limit increase are Senator Charles Schumer (D-NY) and Representative Barney Frank (D-MA), both of whom receive the overwhelming majority of their campaign contributions from the real estate and financial service sectors (hat tip Frothy).
It seems obvious that, in the name of helping the common American, and even with numerous public statements to the contrary, the government will plow ahead and bailout Wall Street.
One good turn deserves another as they say!
