OPINION:
Hardly a week goes by without President Obama accusing Republicans of being beholden to special interests. On Wednesday, he told students at Cuyahoga Community College in Parma, Ohio, that Republicans want to “cut regulations for special interests.” Just two days earlier, he told union members that Republicans would “have those special interests riding shotgun, then they’d hit the gas, and we’d be right back in the ditch.”
Fortunately, those same union members will have their shovels at the ready to fill the nation’s ditches with $50 billion in stimulus funding the president proposed this week for use on infrastructure projects. Thanks to the Davis-Bacon Act, most of that taxpayer cash will wind up in the back pockets of Big Labor. It’s no coincidence that this group played a decisive role in delivering the votes that put Mr. Obama in the White House.
Mr. Obama is equally willing to please his other friends. On Tuesday, the Federal Housing Administration announced a “short refinance option” for underwater mortgages - that is, mortgages on which the amount that the homeowner owes is more than the house is worth. Under this new program, the government promises to guarantee what’s left of the mortgage’s face value after the mortgage holder agrees to write off 10 percent of the principal.
For some big Wall Street financial houses, this could represent a major windfall. Some of these firms bought risky mortgages at huge discounts from their face value, often just 40 percent or 50 percent of the amount owed. Say a Wall Street firm paid $250,000 to take over a risky $500,000 mortgage. If the firm agrees to reduce the face value of what is owed by $50,000, the FHA will guarantee the mortgage. Thanks to the protection from default, the loan’s value instantly increases from $250,000 to $450,000 - a $200,000 gift to the Wall Street mortgage holder.
According to the Center for Responsive Politics, Wall Street giants Goldman Sachs, Citigroup, JPMorgan Chase and Morgan Stanley preferred Mr. Obama to Republican opponent John McCain by nearly 3 to 1, with $2,906,728 in donations going to Mr. Obama’s 2008 campaign compared to just $1,053,705 for Mr. McCain.
When it comes to spending your money on the groups that played a major role in the election, Mr. Obama’s foot is stuck to the accelerator. The special-interest unions and Wall Street are riding shotgun while the wheels of the economy spin and we stay in the ditch.
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