RUSH: We’re going to start in Salt Lake City. This is Christopher, great to have you. You’re up first today in the EIB Network. Hello.
CALLER: Hi, Rush, how are you?
RUSH: Fine, thank you, sir.
CALLER: Good. I was just calling because I had heard about the website that Obama — or the prompter put up recently to help us homeowners in trouble, so I went ahead and filled out the form and I got just inundated with law firms all throughout the nation, I mean —
RUSH: Wait, wait, whoa, whoa. I want to keep up with this.
RUSH: This was the website to help you pay your mortgage?
CALLER: Well, the website that you talked about, homeowner dash — I can’t remember the URL right now, or the address right now, but —
RUSH: Oh, homeowner.gov. Yeah, homeowner.gov or some such thing, and they’re warning you not to be taken in by charlatans trying to sell you something, to only rely on government. Okay, so you went online, you filled out the form, and then what happened?
CALLER: I got inundated with law firms throughout the nation. I kid you not. They wanted $2,700 to renegotiate my mortgages.
RUSH: You mean you filled out President Obama’s form on the website —
CALLER: Yes, sir.
RUSH: — that was set up to help you deal with a housing problem that you had.
CALLER: Yes, sir.
RUSH: And then the next thing you knew you were being solicited by law firms throughout the country who wanted $2,700 to renegotiate your mortgage?
CALLER: Yes, sir. I told them if I had the $2,700 I wouldn’t be behind.
RUSH: That’s true. I mean, give me $2,700 bucks I could get current. (laughing.)
CALLER: Oh, they said they would take three installments, one firm that I talked to, but $900, which is more than my mortgage.
RUSH: I’m not surprised that some vulture law firms would be associated with Obama to try to nick you for $2,700 bucks, but what surprises me here is that Obama led me to believe, and I’m sure you, too —
RUSH: — that when you watched him that you’re going to be interacting with the government here. The government, Obama’s going to make sure that somehow your mortgage lender or holder is not going to be able to take advantage of you.
RUSH: Right, well, fine. Maybe they didn’t, but a law firm wants to. (laughing)
CALLER: I couldn’t believe it. All of a sudden everybody is calling me up wanting me to sign up right away with them, they would renegotiate my mortgages and that I’d have to pay for it, and I was like, ‘Well, wait a minute, I thought this was a government thing,’ and, no, no, no, no, we just get the leads from them.
RUSH: Yeah. What Obama is doing is delivering qualified leads to law firms.
CALLER: Yes, sir.
CALLER: So I didn’t know if you’d covered it. I thought you should know about it. And everybody else to know about it that it’s pretty much a dead end, I mean unless you got $2,700 bucks laying around.
RUSH: Interesting. I hope maybe we’ll hear some more examples from people like you who have interacted with HomeownerSaveMyRearEnd.gov, whatever it is, who have been besieged with solicitations from law firms from all over the country.
There’s just not enough time to be fair with another caller. Not enough time, and there’s nobody up there that I see that I would like to be unfair with.
RUSH: Fred in Cleveland, as we go back to the phones. It’s great to have you with us, Fred. Hello.
CALLER: Hi, Rush. Thank you for taking my call.
RUSH: Yes, sir.
CALLER: Rush, the purpose of my call was in response to an earlier call that you have, somebody who had paid $2,700 to get help with his mortgage. And unfortunately I’m one of those people who also —
RUSH: No, I don’t think he paid it. He didn’t pay it. He went to Obama’s government website to find out how to get help with his mortgage —
RUSH: — and he was solicited by law firms who wanted to charge him $2,700 to renegotiate his mortgage.
CALLER: Well, I was one of those that went to the website and was solicited. I checked out the place that had solicited me with the Better Business Bureau. It had a good rating and an A rating, and I called them, and their spiel was… I explained to them that my income had gone down and it was becoming extremely hard for me to make my mortgage payment.
CALLER: I never missed a mortgage payment. I own a small business, and business has been down in the fourth quarter and first quarter. As the owner, I didn’t want to lay off people, so I took a cut in pay. To make a long story short, they told me, ‘Well, send us in your materials,’ basically like when you’re buying a new home, your income tax, your income and the expenses and all that. They’ll look it over, and if they think they can help, then you pay them a fee.
RUSH: It’s one of these law firms, you’re saying, one of these law firms, the solicitors that did this?
RUSH: Yeah, yeah, yeah.
CALLER: Okay, so I went ahead, they wanted a fee of $2,000, 50% up front, and then when they complete the deal, the other 50%. But they wouldn’t accept the fee unless they felt that they could do some good. So we sent ’em up our papers and everything and two days later they called back and said, ‘Yeah, we can help you. We can work with your mortgage lender and get you taken care of,’ and we said, ‘Great!’ We were extremely excited, ’cause when we had called the mortgage lender, they weren’t going to budge an inch. So we took the money that we were going to use towards our house payment — our mortgage payment, I should say — and we sent it to them, and we sat back and we waited and we waited, and a week later we got a call and they said, ‘We’re sorry, we can’t help you,’ after they had already told us they could.
RUSH: All right. Did you get your money back?
CALLER: No, I didn’t. No.
RUSH: My God. What a scam here. So Obama’s out there selling people like you, defaulted homeowners? In other words, he’s creating a qualified list of people in financial trouble and selling or giving the list to lawyers, and the lawyers can go mine the list and find people like you and run scams on you?
CALLER: Well, the sad thing is it’s put me in a really desperate situation now, because I’ve never missed a house payment and now I’m forced to miss a house payment, and I’m up against the wall here. I mean, I’ve never been in a situation like this. My wife and I haven’t slept. We’re not eating right. We just have nowhere to turn. There’s no place to go for help. I don’t know what to do.
RUSH: What did you think you were doing when you contacted this website?
CALLER: All right. What they proposed was, is that they would call our mortgage lender, which was Saxon Mortgage, and that they would discuss my situation with them.
RUSH: So you thought it was going to be people from the government, from the Obama administration doing this?
RUSH: Yeah, yeah, yeah, yeah, yeah.
CALLER: And then they would —
RUSH: And the next thing you know, you got solicited from a law firm.
CALLER: And they would apply enough pressure that the mortgage lender would reevaluate our mortgage, redo it —
RUSH: Disgusting. This is sick. This is how I interpreted it, too. This is what I thought. When I watched him sell this on TV at his press conference, that’s exactly what I thought they were proposing: you call government, and government is going to help you get your mortgage reduced.
CALLER: Correct. And they were going to adjust it so that it would be. That way we wouldn’t go into foreclosure or anything like that and it would be better for the bank — or better for the mortgage broker — because they wouldn’t have to deal with a foreclosure. It would be better for us because we wouldn’t be missing our mortgage payment —
RUSH: Oh, Lord.
CALLER: — and everybody would be happy. And as it is, it’s now I’m up against it and now I might be facing foreclosure and —
RUSH: You’re going to have to —
CALLER: — my sons might not be able to finish their college.
RUSH: No, wait a minute. No, no, no. Wait a minute. You’re not going to get foreclosed on because you miss one payment. That’s what you said you were going to miss.
CALLER: Well, I — I — I — I — To be honest with you, listen, I’m one of those people —
RUSH: Why don’t you fire some people?
CALLER: — who did everything the right way.
RUSH: I know, but why don’t you fire some people? Why don’t you reduce your business costs, rather than…? If you put yourself out of business everybody working for you loses their job.
CALLER: Well, we did, we did reduce our costs because I didn’t want to lay anybody off. I cut my pay. You know we reduced (garbled).
RUSH: Hang on. I’m way long, have to take a break here but just a couple more questions and I want to hear your answers so can you hang on?
RUSH: Yeah, we’ll be right back. Don’t go away.
RUSH: We’re back to Fred in Cleveland. Fred, are you saying that you might get foreclosed on because with the state your business is in, you might not be able to generate enough income personally for a long time to make a house payment for many months?
CALLER: No, I just need some help. I mean, I would have been able to make this month’s house payment, but then we’d be scraping the barrel each month as we go along, you know what I’m saying?
RUSH: Yeah, but you gave a thousand dollars to the charlatans, right? You haven’t got that back?
RUSH: So what’s your house payment every month?
RUSH: Oh. Oh. That’s big, $2,300 bucks. And how many people have you laid off at your small business?
CALLER: I haven’t yet. Listen, they got families, too, and, you know, my responsibility is to provide them, you know, with a life as well as my own. I mean they’re the reason I’m in business, other than the fact I want to be in business by myself, but, you know, I have a responsibility to them and their families as well.
RUSH: Yeah, but your responsibility is to you first. If you get kicked out of your house —
CALLER: You’re right.
RUSH: — if you get foreclosed on, I mean you’re going to become a wreck.
CALLER: I’m already a wreck.
RUSH: Well, then the management of your company is going to suffer. You’ve got to take care of yourself first here because you’re taking care of everybody else in the process.
CALLER: Well, there’s gotta be some legitimate place out there that will help. I mean, that’s what I thought this was all about, that they didn’t want people like me up against the wall and being in this situation, the —
RUSH: You understand —
CALLER: — was going to offer help.
RUSH: Most people to whom this will happen — you know, we were just speculating here, how many people must this be happening to, if we’ve had two calls on this today? Let’s say that there are many more people out there like you, Fred. The odds are that many of them are not going to blame Obama — he tried, it’s just that he doesn’t know this is going on. The demagogue gets protection from this kind of stuff. He’s insulated from it.
CALLER: Obama said that he and his administration were going to put pressure on all these lenders to work with people. And when we talked to our lender, believe me, they didn’t bend an inch, not an inch. It was like, ‘If you can’t do it, too bad, we’ll take your house.’ That wasn’t the way it was laid out by Obama.
RUSH: No. Of course not. Look, this is not going to make you feel any better, Fred, this is hard for me to say ’cause it’s going to sound like I have no care or compassion for what’s happened to you, but I do, but everybody with any economic sense knows that what they propose is not possible. They can’t keep everybody in a house. They can’t keep everybody employed. The government cannot make everybody prosperous. The government cannot protect and ensure against personal disaster economically. And yet, so many Americans think that that’s precisely what Barack Obama can do and will make the government do.
CALLER: Yeah, but I don’t understand, Rush —
RUSH: It breaks my heart, Fred, breaks my heart to see people get swallowed up by this and believing that there’s some sort of magic that is gonna fix all of this, when there is no such magic.
CALLER: I wasn’t looking for magic. What I was looking for was I’m the type of an individual who always pays his bills, pays his bills on time. Yeah, I’m going through a tough spurt right now, I realize that. But when I hear people who miss house payments for six months and they’re facing foreclosure, and the government steps in and helps them out —
RUSH: Ah, but see —
CALLER: — but here I am, I have never even missed a payment —
RUSH: Wait, wait, Fred, Fred, Fred. Those were subprime people who shoulda never had homes in the first place, and that’s why they were kept in their homes. They’re minority voters and so forth. This is gut-wrenching.
RUSH: We’ve had two calls so far today from people who were having trouble paying their mortgages. These were not subprime mortgages. These were people who had standard mortgages, business owners. In both cases, they went to the website that Barack Obama set up, MakingHomeAffordable.gov. It turns out that these two people have reported to us on the program today that what happened was they filled out all the forms necessary, answered all the questions on the website MakingHomeAffordable.gov, and the next time thing they knew they were solicited by law firms who, in one case, wanted $2,000, another instance wanted $2,700 to call your mortgage company and try to renegotiate your mortgage. Both of these people that called thought they were just going to be talking to some government agency, some bureaucracy, because they had heard Obama announce this. So what they thought was going to happen was that the government was going to call the mortgage lender and, on behalf of them — because Obama had promised this — they’d get a better mortgage and lower their monthly payment. Instead, they were solicited by law firms.
In one case, the guy accepted the offer of help. After giving the law firm his profile, the law firm said, ‘We’re only going to charge you 50% up front and the other 50 after we get it done, but after we see your profile, if we can’t help you, we won’t charge you at all.’ They told him they could help him, he sent in the thousand bucks, this Fred from Cleveland, and after that they told him they couldn’t help him, and he’s out $1,000. So what we have done here, we’ve gone back to April 9th, to our archives, and this is the press conference where President Obama announced his loan shark website. And at the time — this is what’s sad about this — I warned people about this, this idea that somebody can reduce your mortgage for you. By the way, I mentioned this to Fred Cleveland, he said, ‘Well, I saw him doing it for the subprime people.’ Subprime people are a different category. Poor old Fred, he’s a small businessman. Fred, you are the guy with a target on your back. You are the guy that’s going to be paying more taxes because of your small business. In fact, I have a story here coming up, and it’s in the Washington Post about this happening to small business people. Their tax bite is just skyrocketing. But at any rate, let’s go listen to Obama. We have two sound bites here where he announced the loan shark website.
OBAMA: There’s seven to nine million people across the country who, right now, could be taking advantage of lower mortgage rates. We estimate that the average family can get anywhere from $1,600 to $2,000 a year in savings by taking advantage of these various mortgage programs that have been put in place. You can go to MakingHomeAffordable.gov — MakingHomeAffordable.gov, and the way the website is designed, you can plug in your information and immediately find out whether or not you’re potentially eligible for one of these, uh, — one of these mortgage refinances.
RUSH: Now, there’s one thing I probably, in order to be safe here, should mention. We have to allow for the possibility that the two people we’ve had today got hold of a trick website. Now, I’m saying this just to cover a possibility. If you’re the government and you start a website called MakingHomeAffordable.gov, and there’s somebody acting fast out there, and they say they’re going to have a website MakingHomesAffordable.gov, if the White House doesn’t think to buy up all the similar sounding domain names, and if people go out there and buy up some fake, but very close to the original web addresses, then these two guys that called us could very easily have gotten hold of sharks. Now, this we don’t know because by now, I mean if there’s some shark that tried a website very close to MakingHomeAffordable.gov, like making homes affordable — I’m sure it’s been shut down by now, White House would have learned about it. We think. I don’t know. But I’m just mentioning this as a possibility.
All I know is that we have purchased several website names here at the EIB Network just to keep ’em out of other people’s hands. We buy up all the derivatives and all the possible close websites just to keep that kind of thing down. But anyway, leaving that aside as a possibility, let’s just assume these people actually got a hold of the Obama loan shark website MakingHomeAffordable.gov, and they plugged in all the information, and somebody was going to tell ’em whether or not they could be helped, they ended up getting solicited by a law firm. Here’s the second sound bite.
OBAMA: I just want everybody who’s watching today to know that if somebody’s asking you for money up front, before they help you with your refinancing, it’s probably a scam. So take advantage of MakingHomeAffordable.gov, and that will allow you to figure out exactly how to proceed on this in a way that’s making you money, saving you money, as opposed to costing you money.
RUSH: Now, he pretends to warn people about scam artists when in fact his very own website may end up being a place for scam artists. But, this is not very reassuring when he says, ‘If somebody’s asking you for money up front before they help you with your refinancing, it’s probably a scam.’ Not it IS a scam. It’s probably a scam. What does that mean? Probably a scam? In the two cases that we heard about with these two callers, nobody asked for money up front. They lied. The one guy never sent in his $2,700. The guy from Cleveland was told we’re not going to charge you anything until we determine whether we can help you. They then said we can help you, after he’d filled out the paperwork, and that’s when, after that, they kept the grand and told him that they couldn’t help him. Okay, so let’s further assume, shall we, ladies and gentlemen, that this is widespread. I mean we’ve had two calls today. This could be just the tip of the iceberg.
Now, you might be thinking, ‘Well, when Obama finds out about this, he’s not going to put up with this. Obama is going to fix this.’ Yeah, and you know how he’s going to do it? Appoint another czar. Appoint a czar to investigate MakingHomeAffordable.gov, which is essentially what? If our two calls today are accurate, he’s going to be investigating Shylock law firms. Now, he’s gonna need an investigator for this. He gonna need a new czar. Now, note, conducting the investigation, looking into what went wrong, is not going to get poor old Fred in Cleveland his mortgage reduced. None of the steps to find out how this atrocity is happening will fix the problem, just to make it look like the problem’s being addressed. But I’ve got the perfect czar, somebody to investigate shyster law firms, John Edwards. He’s outta work, the poverty thing didn’t work at the university, had a little problem there with the wife during the campaign, desperately wants to be involved in the administration. This is a perfect thing for John Edwards to be assigned, the new czar to overlook corruption at MakingHomeAffordable.gov. What do you think about that?
RUSH: All right, so if you go to MakingHomeAffordable.gov to refinance your mortgage, it says there that your mortgage has to be owned or guaranteed by Fannie Mae or Freddie Mac, and if you’re not, you’re outta luck. If you want a modification and you’re not part of Fannie Mae or Freddie Mac, it’s a longer process, and depending on how you answer the questionnaire, the website says you may be eligible. So we’re going to try to batten this down and figure out what this is. Because if it’s really a government website that is selling lists to law firms who are soliciting people… (interruption) Yeah, it wouldn’t surprise me. It would not surprise me and it also would not surprise me to learn that hardly anybody is succeeding in getting their mortgage refinanced this way, because so much of what this administration does is pure PR, for perception only.
Seven to nine million people, that’s what Obama said who might be eligible for this? That’s nothing. That’s nothing. But 300 million Americans hear it, or 200 million (leave the infants out) and think, ‘Oh, he cares so much! He’s helping. People are having so much trouble in their mortgages. This is such a wonderful man, a wonderful president. He’s so wonderful, Rush.’ (sigh) But lawyers are his buddies. Lawyers and union people give big money to Obama.
RUSH: Listen to this. This ran today in the Washington Post. Now, this prints out to six pages. In the newspaper it would probably be a pretty long story, and the interesting stuff is not ’til later in the story so I don’t know how many people are actually going to read enough of this to get you the dirt on it. It’s by Lori Montgomery and V. Dion Haynes: ‘Gail Johnson doesn’t think of herself as wealthy. The former pediatric nurse has spent 20 years building a chain of preschools and after-school programs that accommodate sick children so working parents can keep their jobs. But, like most small-business owners, Johnson reports her profit on her personal tax return.’ Now, at this point I need to jump in and explain something here so that what you’ll hear in a moment when I continue reading makes sense. When I said that a lot of small businesses are organized as subchapter S’s and file their taxes on a personal return, this is what I mean. They don’t have a C Corp. or a tax return specifically on the business. They just put it on their personal, if they’re subchapter S. Now, if you’re a subchapter S, let’s say that you incorporate, you sell widgets, and you pay yourself a salary. After all the gross revenue comes in and you pay your employees, you pay your expenses, then you pay yourself.
Every dime of profit does not go to the small business owner. Sometimes the small business owner will take it, depending on how large it is, but most small businesses churn the profit. They save it, invest it, or reinvest it in the business. And this is key to understand why these people are gonna get creamed with the upcoming Obama tax increase. Okay. ‘Like most small-business owners, Johnson reports her profit on her personal tax return. In a typical year, she and her husband make more than $500,000, according to her accountant, a figure that throws them squarely into the ranks of the richest Americans — and makes them a prime target for the Obama administration’s tax policy. Since last year’s campaign, President Obama has vowed repeatedly not to increase taxes for families making less than $250,000 a year. That pledge, while politically popular, has left him with just two primary sources of funding for his ambitious social agenda: about 3 million high-earning families and the nation’s businesses. Johnson, with her company, falls into both categories.’
I’m skipping three pages to get to the meat of this. ‘Johnson declined to say whether she voted for Obama. But she said she ignored his tax plans until her husband, who handles real estate and construction for the schools, mentioned it one day. ‘I’ve since talked to my accountant,’ she said. ‘And, oh, my gosh!’ The accountant, Carroll Hurst, said Johnson is unlikely to owe any federal taxes this year due to accounting changes that confer a one-time tax benefit. But in a typical year, he said, Johnson and her husband earn about $515,000 from various entities related to the schools. They claim around $90,000 in deductions — much of it contributions to charity — reducing their taxable income to around $425,000. Johnson said the sum they take home in wages is ‘substantially less.” And, see, this is the key. What they’re paying themselves — I wish more people understood this. All of you small business people, sub S’s, I know you know this, but right here it’s being said — their income. No, the business income is $425,000. They pay themselves a salary after all of that. I don’t know what it is. They may be paying themselves a hundred grand a year, $150, but they get taxed on the $425,000 because they’re putting it on their personal return. If they filed a separate business tax, it would still be the same thing because Obama’s going after both entities, as the story points out.
Now, one of the reasons that people incorporate into a sub-S, even sole proprietorships, even one-person businesses is precisely because — and John Edwards did this, remember, he took a lot of heat for it, but it was legal. The Medicare tax, like Social Security, FICA as a ceiling on what they deduct, your portion, seven-and-a-half percent, but if you’re self-employed you pay both sides. So you’re paying basically 12 to 13 percent Social Security up to a hundred and six thousand a year now, but Medicare is now 2.9 and now 3.9% of every dollar you earn so people go sub-S, pay themselves a salary to limit what they pay — this is what Edwards was doing with his law firm, and then you take at the end of the year a bonus that you call capital gains or some other thing. It’s not taxed as real income, so you don’t pay any Medicare. This is common, people do this. This is why the Obama administration is going to make some tax adjustments to eliminate people getting out of the Medicaid tax. It’s just prohibitive. It’s adding another 4% onto your federal rate. So if he raises it to 39.6, plus the Medicare is going to be 44% for people who are just sole proprietors, independent contractors, that don’t organize as a sub-S.
Now I’ve gotten distracted. The point is the sum they take home in wages is substantially less than the business income, net income of $425,000. That’s the amount they pay themselves. ‘In a typical year, Johnson’s federal tax bill would be about $120,000. But starting in 2011, the higher marginal rates would add about $13,000 a year, Hurst said. Capping the value of itemized deductions at 28 percent would add another $10,000.’ So this woman and her husband, small businesses, are looking at a tax increase every year of $23,000, and she didn’t know this when she voted for the guy. Well, it doesn’t say she voted for the guy, but why else deny it? Or why else not mention it?
‘Other business owners are also nervous. Jim Murphy, president of EST Analytical in Fairfield, Ohio, which sells analytical instruments to environmental testing labs and pharmaceuticals, said his company is struggling in the sluggish economy. But if profit returns to pre-recession levels — about $455,000 — Murphy said his accountant estimates that’ his tax bill will double to $120,000 because of Obama’s proposals. ”The misconception is that guys like me take [our profits] and put it into our pockets,’ said Murphy, who employs 47 people. ‘But the money the company earns in a given year is used to buy additional inventory so we can grow and hire.’ A 50 percent tax increase, he said, would be ‘really painful.”
These small business people like Fred in Cleveland, you’ve had a bull’s-eye on your back ever since this guy got elected. The idea that you might get your mortgage refinanced? No, you’re not the target for that. You are the target to have even more money taken away from you. Now, imagine this. He’s got a business with 47 employees, and his profit, this Murphy guy, his profit was $455,000. That’s not what he pays himself. He just said it. ‘The misconception is that guys like me take [our profits] and put it into our pockets.’ He pays himself something, I don’t know what, doesn’t say, out of the $455,000. But he pays personal taxes on the $455,000. There is a deduction he gets from it however. So small business, Washington Post has it, in the first hundred days, we’re talking about all the great achievements, all the wonderful things Obama’s done, he’s the best president we ever had, oh, my gosh, people can’t contain themselves, small business is braced for tax increases, auto business in the tank, the bank business in the tank, everything is going to hell in a handbasket.