Belmont Club

Rearranging the deck chairs on the Titanic

This can’t be good for the financial system.

NEW YORK (AP) — A stunning 48 percent of the nation’s homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and the rate for homeowners with all mortgage types hit a new record, new data Thursday showed.

But that’s not the worst of it.

The reckless lending practices in states like Florida, California and Nevada that were the epicenter of the housing crisis are no longer driving up the nation’s delinquency rate. Instead, the foreclosure crisis now is being fueled by a spike in defaults in states like Louisiana, New York, Georgia and Texas, where the economies are rapidly deteriorating and thousands are losing their jobs. …

That trend highlights one of the biggest challenges confronting the Obama administration’s mortgage relief plan launched this week. While the $75 billion plan could help change the loan terms or refinance up to 9 million homeowners, unemployed borrowers will have a hard time qualifying.

That can only weaken the balance sheets of the financial system. But straitened circumstances shouldn’t stand in the way of other great enterprises, which as President Obama says, none dare morally oppose.

President Obama yesterday presented his goal of fixing the healthcare system as a political imperative, as well as a moral and economic one: Americans, he said, will no longer stand for soaring costs that have bankrupted millions of families, hobbled businesses, and crowded out other public needs. …

Though he repeatedly emphasized the need to compromise, Obama said he would not stand for a stalemate, which he said threatens the “very foundation of our economy. Those who seek to block any reform at all . . . will not prevail this time around,” he said. …

In a conference call yesterday morning, Health Care for America Now, a coalition of about 800 liberal groups, declared it would fight to include a public insurance plan to help keep costs down. Later, in a statement, the group said it was “no surprise [Republicans] don’t want choice if it threatens the profits of the private health insurance industry.” …

In his budget last week, Obama set aside $634 billion over 10 years for healthcare, what he called a down payment on an overhaul that many analysts estimate will cost more than $1 trillion …

“Nothing is harder in politics than doing something now that costs money in order to gain benefits 20 years from now,” Obama said.

Maybe’s got that one upside down. Nothing is easier than spending money now that people 20 years down the road will pay for. Charles Krauthammer, commenting on the President’s desire to implement his health care, education and carbon trading programs, wrote that whatever action the current situation demanded, it seemed curiously subordinate to a pre-existing political agenda whose importance, unlike the balance sheets of the banks, remained completely unchanged.

At the very center of our economic near-depression is a credit bubble, a housing collapse and a systemic failure of the entire banking system. One can come up with a host of causes: Fannie Mae and Freddie Mac pushed by Washington (and greed) into improvident loans, corrupted bond-ratings agencies, insufficient regulation of new and exotic debt instruments, the easy money policy of Alan Greenspan’s Fed, irresponsible bankers pushing (and then unloading in packaged loan instruments) highly dubious mortgages, greedy house-flippers, deceitful homebuyers.

The list is long. But the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe in the first place.

And yet with our financial house on fire, Obama makes clear both in his speech and his budget that the essence of his presidency will be the transformation of health care, education and energy. Four months after winning the election, six weeks after his swearing in, Obama has yet to unveil a plan to deal with the banking crisis. What’s going on?

“You never want a serious crisis to go to waste,” said Chief of Staff Rahm Emanuel. “This crisis provides the opportunity for us to do things that you could not do before.”

Health, education and energy—worthy and weighty as they may be—are not the cause of our financial collapse. And they are not the cure. The fraudulent claim that they are both cause and cure is the rhetorical device by which an ambitious president intends to enact the most radical agenda of social transformation seen in our lifetime.

He’s going to save the patient, even if he kills him trying. “I’m from the government and I’m here to help you.” Yes, you.