Wednesday, April 23, 2014

Home Mortgages, Business Loans Still Slow in US, But Palestinians Need Homes, Businesses So We Gave Them Millions

U.S. tax payers sent $313 million tax dollars to Palestine to "fund" mortgages for Arabs, and another $110 million in loans to small and medium-sized businesses on the West Bank. The Fed has been printing $85 billion every month for a very long time to shore up the U.S. economy. We are told most of it is going to banks, yet lenders are not exactly generous to American businesses or home owners with our inflation-generating monetary policy. Look at this:

“Despite the confluence of promising signs,” write Peter Eavis and Jessica Silver-Greenberg today, “little in the vast system that provides Americans with mortgages has returned to normal since the 2008 financial crisis, leaving a large swath of people virtually shut out of the market.”

Of course, mortgage availability was way too lax in 2006-7, and the new index doesn’t have historical data going back before the end of 2010, so we can’t really see what was normal before things went crazy. But anecdotally, it’s much harder to get a mortgage now than it used to be.
In the NYT article, the Center for American Progress’s Julia Gordon says that “a typical American family” with a credit score in the low 700s is “being left out”: that’s a very long way from subprime, which is what you’re considered to be when your credit score is below 620. Source: Reuters January 2014
We have a program for these financial ventures. Of course we do. The Overseas Private Investment Corporation (OPIC) is "federal." Cute, huh? Sticking that word "Private" into the name.

“OPIC provides financial products, such as loans and guaranties; political risk insurance; and support for investment funds, all of which help American businesses expand into emerging markets.”
The GAO report released Tuesday described some of the actions OPIC is taking in the emerging market of the Palestinian territories...

“OPIC has committed to lend about $313 million; PIF [Palestine Investment Fund] has committed about $72 million, and two banks account for the balance of the committed lending,” says the GAO. “However, as of April 2013, OPIC and PIF had not yet disbursed any funds. Second, OPIC and PIF are co-guarantors in a Loan Guarantee Facility (LGF) program in the West Bank, guaranteeing up to $110 million and $50 million in loans, respectively, to nine regional banks to support lending to small-and medium-sized enterprises.”
The PIF is an entity that was created by the Palestinian Authority president.
How many rockets did $313 million buy? How many sophisticated tunnels into Israel did $423 million buy?

At least in America we are paying attention to credit scores. That's a good thing. Lenders were forced by the government to give mortgages to home buyers with no credit, with no down payment required, for homes they knew they could not afford. When the industry went bust, those "buyers" walked away. Didn't have a dime in the house, and didn't lose a dime, leaving neighbors with substantial equity in their homes bereft and living close to homes left vacant, in disrepair and their own homes valued less than their unpaid mortgage.

The monies above are in addition to the $426 million in aid slated for Palestine, bringing the total to about $850 million in 2013. The budget for Palestine in 2014 is $440 million.
The Government Accounting Office (GAO) report is here. The direct dollars and loans came from the U.S. State Department.

Posted by Maggie @ Maggie's Notebook

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