The Brian Sullivan Blog
  • November 5, 2008 03:44 PM EST by Brian Sullivan

    Fill Your Drink While the Ta(r)p is Still Open

    The tap on the bailout keg is still flowing and the new home builders are the latest group looking for a drink.

    Fox Business’ Senior Washington Correspondent Peter Barnes reports that less than 24 hours after the election the National Association of Home Builders (NAHB) is ready to slap a proposed bailout bill for new home sales onto Congress.

    Here are some of the details Fox Business has learned:

    The NAHB plan calls for a 10% tax credit for every home buyer in 2009, capped at $20,000 per primary residence. A current credit of up to $7,500 for only first time home buyers hasn’t helped the housing market that much, the home builders said, and expires June 2009. The new tax credit would cost $125 billion.  The plan would also create government interest rate subsidies on mortgages in which all families buying a home in 2009 would pay just 3% for the first six months of 2009, rising to 4% for the last half of 2009, on so-called conforming loans that can be acquired or insured by government housing agencies. At the end of 2009, rates would adjust up to current market rates on mortgages. The interest rate subsidy would cost $143 billion.

    The home builders would like to include their plan in a second stimulus bill if Congress passes one.  The group did not offer any specific proposals to pay for its proposal, but said Congress could pay for it by adding to the deficit.  If they cannot get the proposal included in a stimulus bill, the home builders will seek to get it passed separately next year.

    Most of the stocks of the home builders have been hit hard.   Companies like Centex (CTX: 11.57, -0.97, -7.73%), Lennar (LEN: 8.62, -0.45, -4.96%), Pulte (PHM: 10.77, -0.53, -4.69%), DR Horton (DHI: 6.87, +0.01, +0.14%) and others are in some cases 75% from their all-time highs of just a few years ago.

    There is no question the industry is hurting.   According to the group’s website:

    NAHB is forecasting 936,000 total housing starts for 2008, a 30.2% decline from the 1.34 million homes produced last year.  Starts in 2009 are projected to slide 16.2% further, to 784,000 units, and 2010 would bring production up to the 1.0 million level.

    But that should not be enough to sway Congress on the NAHB’s proposal.

    At some point the Beltway Brigade needs to realize we cannot rescue every industry.   At some point the tap must be shut off and the drinking stopped.  A hangover is coming either way, and like a hangover only time can cure it.   Building a home is a speculative business.   Big risks for potentially big rewards.  And for years the industry surged and profits soared.

    The housing industry needs to realize that for years during the boom home prices surged beyond the reach of many Americans.   Prices spiked, and even lower interest rates kept homes out of reach for many potential buyers, or worse prompted them to stretch and jump into bad mortgages that created a only a temporarily affordable monthly payment.   House prices were allowed to surge, doubling in some areas in just a matter of years.

    The reverse argument to any rescue plan is then: if you are going to create an artificial bottom in the market, why shouldn’t Congress be allowed to cap prices on the upside? Maybe Congress should have stepped in around 2005 and forced the industry to slow or stop the rise in home prices?

    While I am making only a facetious statement, the point is made.   Many potential buyers watched home prices rise beyond their reach and prudently saved for the slowdown.   Well, the bust is here and now industries are asking for bailouts.   No doubt many of these patient buyers are wondering where the government interference was during the boom.

    Over-regulating a market either way is at best dangerous and at worst anti-American.   But we’ve already tapped the bailout keg.  As Congress likely soon debates “Stimulus II” and more billions spent, it must understand that a “free” market means there are booms and busts and you ride them both out.  You can’t protect the bottom and leave the top to soar uncontrolled.

JeezeLiz

Of course Wall Street will have mergers now in the financial sector to back the up and coming helium 3 energy wave in the next 10 years. Petro was harnessed to jump forward. How much money do you think you NEED to get to the moon to harvest h3. yeah, this is petro's LAST run bush held off on global warming until the last oil corp. record profits were set. Now that we know petro will harm life, if not kill it long term (remember that good ole LEAD in the gasoline, why, it's SO much cleaner now ! lol) ? ? ?? Now that we know this, we can either progress and sell out our kids for a quick buck ? on oil futures? OR - we can do what is necessary. Aggressively move away from petro AND coal. Wow Leeeeeeroy - that coal sure kept us warm last winter, too bad it made your child get autism ! Well worth it if you ask me ! Geeeee Leeeeery- that oil sure was a good idea, that blowed up REAL good in that year 1860 blowup engine ! in the year 2008. Think your kids asthma was WORTH the choice for petro ? I've had it with the irresponsible adults. At some point ? I think you just have to go shock and awe when people are threatening your security. Bush did it must be right right ? Come on, who can object to some good ole fashioned 'shock and awe' personally, sounds like the terms a terrorist would use 'shock and awe' I know one thing- SURE are a LOT of parentless iraqi children who will have a chip on their shoulder - lord knows, what would YOU do if your parents were killed in a blind carpet bombing attack called Shock and Awe ? Bush is PLANTING seeds of hate. he is ASSURING there WILL be problems later. Blackwater ? you don't send blackwater in - remember Fallujah ? when I LATER learned the bodies dragged through the streets were BLACKWATER bodies ? I thought, these common folk people PROBABLY had ENOUGH of the black sunglass fully armed to the teeth trigger happy blackwater folks to say - sorry, we've had enough, we're going to drag you through the streets -for ALL the killing of ALL the children, and adults blackwater has done. there are seeds of hate planted SO deep - it's going to be YEARS before they sprout.

November 6, 2008 at 11:01 am

JeezeLiz

To Scott's post above on : "Thank you for “investing” in their Marxist educations throughout our universities nationwide. You will soon feel the effect on your nest egg of paying people like Professor Bill Ayers to indoctrinate them into the religion of a place to which we used to refer as “the evil empire”."... end paste Uh, nestegg's have been halved pal. They're already 50% off no, bush was an energy lobby's dream - bush deregulated energy - forgot your argument about the dollar - try being able to breath. don't worry exxon made 40 Billion on that petro going down the throat in gaseous form. Why who cares about money when you can die of pulmonary disease. Mercury from coal stacks there ya go - what's more important - your 'nest egg' or your childrens neurological health ? you tell me sounds to me 'scott' like you'd sell the kids out for a buck now - please - go find a mirror and do what is necessary.

November 6, 2008 at 10:54 am

JeezeLiz

Liz, Maybe do a story on just what hedge funds are. I was shocked, I saw an MIT mathematics professor who supposedly started the first hedge fund, but over at wikipedia, says they came about in the 1940's - AND that they were designed to allow small groups of wealthy investors to do things they wouldn't be able to do under regulation by the SEC- dealing with shorts etc. That to me makes me wonder, and I'm formulating this thought mid-sentence - where most of my thinking progresses ! - but DIDN'T I just read Fannie and Freddie are NOW the largest hedge fund in the world ? or was it the US ? EITHER WAY - if hedge funds were ways for people to skate regulations ? then what does this say about Treasury ? wanting to be part owner - ok 80% of Fannie and Freddie. Bottom line realization in these sentences is - why is the fed involved in hedge funds, names the largest one in the nation ? I'd say if you had the largest hedge fund ? you could probably - with the right software - keep the markets looking any way you wanted.

November 6, 2008 at 10:43 am

JeezeLiz

In response to a post above: Comment by B Scott Nov 5th, 2008 at 8:07 pm I have little sympathy for the home builders,if they had done their homewo... end paste I say- When these home mortgages are backed by the nation state ? Forget Hello Kitty Welcome to China. These are VERY puzzling times, I hope Liz MacDonald continues to bring genius - as I root to the Roman use of the word to represent the hub of the spokes in a wheel - where all things come together... the ability to integrate and MAKE the wheel. etc. Hope MacDonald continues to help bring light into just what the hell is going on. Puzzling too that NewsCorp and FBN typically have a leaning towards one side politically ? but never have I heard any political intonations from MacDonaold - ALWAYS the facts, and ALWAYS fresh insights on those hard earned/research facts. Whatever they're payin' ya Liz it's not enough. Hedge Fund managers shouldn't get these huge payoffs so people can go shelter their shorting scams. There are people who have realized humanity is a collective work in progress and then there are humans who are in the process of waking up, and then there are those in slumber. Buddhists say most people live their entire lives asleep. MacDonald is AWAKE - and the closest to a real politicians functionality as people want from them - someone who ACTUALLY CARES about the truth for the benefit of JUST illuminating the truth.

November 6, 2008 at 10:40 am

NIck

I owned a landscape business and sold it when I saw this train wreck coming.Now,I think I'll open another biz and ask the gov. to provide stimulus for landscaping.FREE SOD and SHRUBS FOR EVERYONE!

November 6, 2008 at 10:01 am

Kevin

So... they are proposing an "Adjustable Rate Bailout"? Isn't that the loan product that propelled us into this mess. However, this is even better... the government is going to subsidize a failed lending solution. Now my tax dollars are promoting default. Their creative problem solving abilities are truely astounding.

November 6, 2008 at 8:52 am

B Scott

I have little sympathy for the home builders,if they had done their homework like most other greedy industries,they wouldn,t be in the fix they find themselves in.Let me explain,when they built their houses, they should have used a glue that breaks down after say 10/15 years,kinda like cars have a short lifespan, I,ve even noticed that the last couple pairs of shoes i,ve had seem to fall apart a lot sooner. If they,d been on the ball in the nineties, the houses would all be tumbling down about now, and they would have so much work they wouldn,t even think about asking for Gov,t assistance.

November 5, 2008 at 8:07 pm

Scott

November 5, 2008 The Ultimate "Sucking Sound" by MrArbitrage I just read a column by JOHN DVORAK of Maretwatch.com titled: “How to Obama-proof your portfolio: One approach, apparently, is not to invest in America.” I agree with the title but his objective was geared more toward speculating on which sectors to buy and which to avoid. But the title made me think: Perot spoke about a “giant sucking sound” resulting from NAFTA. As an investor, you may want to prepare yourself for the ultimate “sucking sound” as the money leaves the US markets and goes to the Cayman Islands and elsewhere. As a financial professional, I have seen first hand, wealth being wired out of Venezuela as those who have money realized what is going on with Chavez. The financial world is rightfully getting the picture as they hear the laudations emanating from Castro and Chavez in regard to our vote for “change”. It’s like it just hit them - "Something's wrong with this picture; these are not good guys." Liberals would have you believe they are but there’s nothing new about that. See Hanoi Jane Fonda. These people used to be harmless “Kook fringe” but while we were sleeping the past 30 years, they became Congressmen, Senators, Supreme Court Justices and Professors. Thank your children and grand-children for “rocking our vote”. Thank them for listening to our communists in Hollywood, in academia as well as our pseudo-intelligentsia Barbara Walters, David Gregory, Brian Williams, Chris Matthews, Andrea Mitchell, Keith Olberman and Tom Brokaw. Thank you for “investing” in their Marxist educations throughout our universities nationwide. You will soon feel the effect on your nest egg of paying people like Professor Bill Ayers to indoctrinate them into the religion of a place to which we used to refer as "the evil empire". Oh, by the way, just thought you should know, that long haired guy proudly displayed on your kid's tee shirt; that's not some old character played by Brad Pitt or Al Pacino - that's Marxist guerrilla leader Ernesto "Che" Guevara (pictured below). He's become quite the "rock star" among our college students these days. They spoke loudly yesterday, their voices will reverberate in infamy. See http://tableofwisdom.com/MrArbitrage_on_Market_.html for more on this.

November 5, 2008 at 5:03 pm

about this blog

  • Brian Sullivan joined FOX Business Network (FBN) in April 2008 as an anchor. He co-anchors the 10am-12pm ET hours of the FOX Business block. Prior to joining FBN, Sullivan served as an anchor for Bloomberg Television where he hosted the programs Morning Call and In Focus.

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