Vincent Farnsworth 6:31 p.m., Dec. 4
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Developer Billion Dollar Bailout Hidden in Stimulus Bill
There is plenty of blame to go around for the current financial crisis, but their is also plenty of borrowed bailout money now. Is it fair to dole out tax payer money to the industries that wrecklessly abandoned any common sense or good conscience for astronomical profits and personal gain? At a time when all of us are being asked by President Obama to make sacrifices and roll up our sleeves and work to save this country...why in the world are we sending billions of dollars in checks to the land and housing developers that got us into this mess.
I have been following this since the talk of any bailouts began last summer. I started a website called developeralert.org several years ago to keep tabs on all the insidious clandestine behavior of the building industry. This link is from last summer when the meltdown began... http://www.developeralert.org/indexmeltdown.html
This Politico article back in December outlines the Building Industry's (developer lobbyists) big push to shape this stimulus package. Look at what they were pushing back then: http://www.politico.com/news/stories/1208/16324.html.
"The $200-billion plan would provide home buyers with a credit worth up to $20,000 and would drop mortgage interest rates to as low as 3 and 4 percent next year. The plan is aimed at coaxing scared homebuyers back into the market."
Here is the quote from the New York Times on the tax credit being placed in the bill.
"The tax credit would give buyers 10 percent of the price of a primary residence bought within one year, up to $15,000, and is intended to stabilize plummeting home prices, which caused a wave of foreclosures and led to the near collapse of the financial system as Wall Street firms wrote down billions in mortgage-backed assets."
Lawmakers gave them what they wanted....huge incentives to ANY buyers to get this glut of homes off their hands.
But probably the BIGGEST KEY benefit to developers cloaked in this "Stimulus Bill" is the ability to carry back losses for 5 years instead of 2. They tried to push this in the Housing stimulus in September but got so much blow back from citizens that they took it out. Now its back, hidden under the guise of helping ALL businesses.
"The legislation also would allow businesses to carry back net operating losses for five years, instead of the current limit of two years. This provision would generate cash through tax refunds for companies that now are losing money but previously were profitable." (Note the use of the words "cash tax refunds". This is cold hard cash in the billions coming to these guys from us)
So essentially the developers, or as they have renamed themselves..."homebuilders" (as if they are magnanimously and altruistically building our homes) that raked in billions in profits due to sketchy business practices now do not have to absorb their losses...we do. It is my understanding that now they will get a HUGE check in the mail from the Federal Government for any taxes they paid for the passed 5 years during the boom on their profits.
So these "homebuilders" lobbied hard and won but do you really think they have the answer to our problems? Didn't they cause the problem in conjunction with the banks? The developers built way too many lackluster tract homes and the banks made money so cheap and easy a homeless person could get a half million dollar loan and now they wonder why and how this happened?
And now they have successfully lobbied congress at a cost to us of over 35 billion dollars (double what they initially said, according to the Wall Street Journal's report as of Feb 6th) plus undisclosed billions in tax breaks (writing off losses for 5 years instead of 2) to puff up an already artificially inflated housing market. The unprecedented $15,000 tax break to home buyers is not for NEW home buyers....its for ANY home buyers. Make no mistake, the homebuilders have plenty of stock that they need to get off the market so they can get what's left of the banks money... fast.
Should we have to pay for their mistakes?
Aren't we rewarding the behavior that started this mess? We made it way too easy to get into the housing market. So lets solve the problem by seducing even more people to get into homes that they cannot afford. Because once you are in its smooth sailing, right? And don't worry because after this 1 trillion dollar stimulus plan there is a plan to rescue people from foreclosures so even if you get into a mortgage you can't afford we will protect you from getting kicked out. What do you mean with what money?....with your money that we are going to borrow from you.
Am I the only person that doesn't think this makes any sense?
And really...what does a $15,000 tax break really do? Who does it actually help? Doesn't it just artificially re-inflate the market that is finally beginning to return to normal. Doesn't it just open the door so people can get into something they cannot afford just like the irresponsible loan practices? Doesn't that $15,000 ultimately just benefit the developers that are dying to get these homes sold. The whole point of the free market is that we allow the market to find its own bottom. Wouldn't the 35+billion dollars plus the additional billions in loss write-offs be better spent creating jobs so people could afford the existing market prices?
Make no mistake, this stimulus bill is a bailout for the developers . If you have any doubts about what I am saying just look at how homebuilders helped the market soar on Friday. Do you really think that would happen if there weren't tons of goodies packed in the package for them to profit. http://washingtontimes.com/news/2009/feb/07/stimulus-talk-bailout-spur-wall-street-rally/
So while you and I are broke and just trying to pay our bills they are getting million dollar checks in the mail from us for taxes paid on passed profits...money we are borrowing mind you from the Fed that we HAVE to pay back with interest and money that they get to keep.
Is this really the right answer? I encourage everyone to write their senators and tell them to oppose this bill which throws billions of borrowed money into the pockets of the people that created this mess and encourages the same parasitic destructive behavior of the passed 5 years. President Obama, why do we continue to reward vice over virtue?This is not the change you promised. http://www.senate.gov/general/contact_information/senators_cfm.cfm
I will leave you with this quote from the National Assn of HomeBuilders website regarding their lobbying power... "Ranked #11 on Forbes’ “Power 25” lobby organizations, NAHB staff works with Capitol Hill leaders to educate Congressmen on the importance of the housing industry. NAHB has the strength in numbers to defeat excessive regulations and defend affordable housing initiatives – saving Builder members time and money."