Living in River City

Fact Check: President Glosses Over Complex Realities

WASHINGTON -- President Barack Obama's assurance Tuesday that his mortgage-relief plan will only benefit deserving homeowners appears to be a stretch.

Even officials in his administration, many supporters of the plan in Congress and the Federal Reserve chairman expect some of that money will go to people who should have known better than to buy that huge house.

The president glossed over a number of complex realities in delivering his speech to Congress and a nation hungry for economic salvation.

A look at some of his assertions:

OBAMA: "We have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and refinance their mortgages. It's a plan that won't help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values."

THE FACTS: If the administration has come up with a way to ensure money does not go to home buyers who used bad judgment, it hasn't announced it.

Defending the program Tuesday at a Senate hearing, Federal Reserve Chairman Ben Bernanke said it's important to save some of those people for the greater good. He likened it to calling the fire department to put out a blaze caused by someone smoking in bed.

"I think the smart way to deal with a situation like that is to put out the fire, save him from his own consequences of his own action but then, going forward, enact penalties and set tougher rules about smoking in bed."

Similarly, the head of the Federal Deposit Insurance Corp. suggested this month it's not likely aid will be denied to all homeowners who overstated their income or assets to get a mortgage they couldn't afford.

"I think it's just simply impractical to try to do a forensic analysis of each and every one of these delinquent loans," Sheila Bair told National Public Radio.

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OBAMA: "We have already identified $2 trillion in savings over the next decade."

THE FACTS: Although 10-year projections are common in government, they don't mean much. And at times, they are a way for a president to pass on the most painful steps to his successor, by putting off big tax increases or spending cuts until someone else is in the White House.

Obama only has a real say on spending during the four years of his term. He may not be president after that and he certainly won't be 10 years from now.

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OBAMA: "Regulations were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn't afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day."

THE FACTS: This may be so, but it isn't only Republicans who pushed for deregulation of the financial industries. The Clinton administration championed an easing of banking regulations, including legislation that ended the barrier between regular banks and Wall Street banks. That led to a deregulation that kept regular banks under tight federal regulation but extended lax regulation of Wall Street banks. Clinton Treasury Secretary Robert Rubin, later an economic adviser to candidate Obama, was in the forefront in pushing for this deregulation.

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OBAMA: "In this budget, we will end education programs that don't work and end direct payments to large agribusinesses that don't need them. We'll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we're not paying for Cold War-era weapons systems we don't use. We will root out the waste, fraud and abuse in our Medicare program that doesn't make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas."

THE FACTS: First, his budget does not accomplish any of that. It only proposes those steps.

That's all a president can do, because control over spending rests with Congress. Obama's proposals here are a wish list and some items, including corporate tax increases and cuts in agricultural aid, will be a tough sale in Congress.

Second, waste, fraud and abuse are routinely targeted by presidents who later find that the savings realized seldom amount to significant sums. Programs that a president might consider wasteful have staunch defenders in Congress who have fought off similar efforts in the past.

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OBAMA: "Over the next two years, this plan will save or create 3.5 million jobs."

THE FACTS: This is a recurrent Obama formulation. But job creation projections are uncertain even in stable times, and some of the economists relied on by Obama in making his forecast acknowledge a great deal of uncertainty in their numbers.

The president's own economists, in a report prepared last month, stated, "It should be understood that all of the estimates presented in this memo are subject to significant margins of error."

Beyond that, it's unlikely the nation will ever know how many jobs are saved as a result of the stimulus. While it's clear when jobs are abolished, there's no economic gauge that tracks job preservation. The estimates are based on economic assumptions of how many jobs would be lost without the stimulus.

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OBAMA: "First, we are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans and small business loans to the consumers and entrepreneurs who keep this economy running."

THE FACTS. Obama appeared to be referring to an expanded Federal Reserve program established in the Bush administration but never activated. The program would unclog consumer lending, allowing the Fed's program to expand to $1 trillion from $200 billion. The Fed said it will lend the money to banks and other financial institutions in order to spur more lending by those companies through credit cards and student and auto loans.