Democrat Financial Logic Bomb II

Because fiscally nuking the U.S. private economy with the "home ownership as entitlement and civil right" mentality via Fannie Mae and Freddie Mac just wasn't enough, and The One needs more crises to exploit:

A former Fannie Mae executive warned a House panel Thursday that the Federal Housing Administration is destined for a multibillion-dollar taxpayer bailout in 24 to 36 months, an analysis that the agency’s top official immediately dismissed as “completely unfounded.”

At a hearing before a House Financial Services panel, Edward J. Pinto predicted that the FHA will suffer $40 billion in losses, leaving it unable to cover its bad loans without taxpayer help. Pinto, a real estate finance consultant who served as Fannie Mae’s chief credit officer from 1987 to 1989, said he testified so lawmakers would “not be able to say that no one told them of the magnitude of the impending losses.” …

In his testimony, Pinto called the audit’s underlying assumptions “overly optimistic.” The FHA’s escalating default rate, its rapidly eroding reserves, and a recent dramatic increase in the amount of money people can borrow on FHA loans will have disastrous consequences, he warned the panel. FHA loans are especially vulnerable because they require only a 3.5% down payment — well below the 10-20% private lenders demand.

Pinto compared the FHA loans with Fannie Mae’s book of loans in 2006, which he said have similar characteristics, and he applied the default rate on the Fannie loans to the FHA mortgages. By that measure, the FHA was short $40 billion on its main financing account as of September 30th, in effect stripping the reserve account of its required funding and leaving it $14 billion in the hole, he said. The FHA, based on its history, will not be able to modify enough loans to thwart the losses.

Pinto suggested that the FHA raise its down payment requirement to 10%, reduce the cap on how much money FHA borrowers can borrow, and require FHA-approved lenders to co-insure the loans.

I wasn't hyperbolizing in my lede, gentles.  The Democrats are doing the exact same damn thing they did with Fannie and Freddie, and whistling past the graveyard toward which they are hurtling the FHA like a meteor.  The only possible difference in ostensible rationale is that the first meltdown last September was meant to (1) be blamed on George W. Bush and the GOP, since it happened on his watch and (2) panic the electorate into an electoral stampede that would hand the collapse's architects, and their tin god, total power.  Infuriatingly, that is precisely what it did.  This time it's meant, much like Hogzilla and the Fed's printing spree were, to put over the spin that Barack Obama has waved his magic wand and miraculously "healed" the economy with his "light-bringing genius".  And this DFLB sequel will have the same disastrous result - either right in time for Barry O's re-election campaign, or perhaps even next year's midterms.

But - and like Jennifer Lopez's, it's an awfully big but - will another Wall Street defenestration be blamed on the ruling Donk Poliburo, or will the latter be able to harness another public panic into further massive socialistic offensives and entrench themselves even deeper into permanent power?  I think the former, but you can bet your last Obama bobble-head doll they're convinced of the latter - and that that is its fundamental purpose.