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Guest Thinkers

Debt Ceiling Deal Smells Like A Subprime Loan

With the nerve wracking threat of a default by America on its outstanding debt being broadcast on all the news channels practically twenty four hours a day, I am reading a lot of chatter on the web by progressive Democrats who are insisting that President Obama suddenly morph into Samuel L. Jackson and start kicking ass and taking names. Conversations at the more extremist conservative websites I’ve come across often veer off into John Wayne territory, with calls by staunch Tea Party supporters for the GOP congressional leadership to simply reject any compromise proposals and stand their ground. Neither one of these groups should be wasting their time on the charade of this artificial debacle, because the fix has been in for some time.     

Back when I was a loan officer, the most hectic day for a borrower was often the day their loan closed. Many of the processes required to be completed to fund a loan after it was cleared to close by the underwriter – issuing flood certifications, pulling final payoff figures, calculating outstanding property taxes – didn’t happen until the last minute, and sometimes not until right before the borrower was scheduled to sign the loan documents. To those of us in the industry, who understood the rules of the game, this was business as usual. To the borrowers who were going through the process for the first time, it was nerve wracking.

The senate and house leadership activities at this late date in the debt ceiling debacle, while the threat of imminent default by the United States on the servicing of its outstanding debt obligations looms overhead, seem to have much of the same flavor, because the congressmen who are holding procedural votes today to prepare for the eventual deal that will likely be reached expect every controversial piece of legislation to go down to the wire.

President Obama and the Republican Party have both been doing an enormous amount of maneuvering these past few weeks to try to turn this crisis to some sort of political advantage for the 2012 presidential election. But they both are going to find that long term, they will have done little more than play to their respective bases as soon as the next political crisis or natural disaster occurs.

President Obama’s re-election chances hinge largely on the skill of his campaign managers to replicate their ability to register large numbers of new voters, who would be the voters least likely to pay attention to the details of the political machinations in Washington. Getting a majority of his supporters from 2008 back to the polls will require the usual snake oil, but it can be done.

The GOP’s chances to regain the White House will center around the ability of the Republican primary process to elevate as their eventual nominee a candidate who has more appeal to the general public than they do to the Tea Party. These conservative political terrorists will emerge from this crisis next week with an even more polarizing public image than they have managed to concoct thus far. As the Tea Party has shown this week, they will be more of a problem to their own political party than they will to the president.

The other similarity between this unnecessary nightmare playing itself out in the nation’s capitol today and a chaotic mortgage closing are the kinds of solutions enterprising closing attorneys would come up with to meet the terms of their closing instructions from the lender so they could disburse funds. With everybody’s fees on the line, there was a lot of incentive to do the kind of creative thinking that has landed more than a few of my former colleagues behind bars.

In the case of Congress and the White House, seriously considering the idea of a creating a new “Super Congress” committee to achieve the same spending reductions all the main players in this crisis are already authorized to perform should be considered criminal. At this juncture in the proceedings, America’s political leaders remind me of nothing so much as my old subprime loan officer buddies and their war stories about desperate borrowers who got to the closing table only to be blindsided by the news that their rate had risen and the fees had doubled at the last minute.

I guess I don’t have to tell you who always gets hosed when the paperwork is finally signed on these kinds of subprime deals, whether they are mortgage loans or debt ceiling agreements.


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