01/10/2012 05:43 pm ET Updated Mar 11, 2012

2012 Surprises

There's more than enough gloom to go around these days and people are pretty pessimistic everywhere. That can become a self-fulfilling prophecy if consumers stop spending, savers put their money in their mattresses and governments put on the brakes.

But there is one reason to be optimistic that, "Black Swans" aside, 2012 will be a good year for Americans and Canadians. It's called the American presidential election year.

Indications are that President Obama is preparing to bail out the 99% the way the 1% were back in 2008 when Wall Street wrecked the American and global economy.

He's made his first move, in the political chess game in Washington, by going ahead with an appointment, without Congressional approval, of a guy to head the consumer finance agency.

The Republicans are screaming about it because they have been obstructing everything to defeat Obama.

The next move, some speculate, will be a new guy to run the Federal Housing Financing Agency, another Congressional bypass.

And that will position him to deliver a "January surprise" in the form of a trillion-dollar mortgage forgiveness scheme, a phrase and prophesy which appeared on the website of the right-of-center American Enterprise Institute this week.

If Obama launches his "surprise," the U.S. economy, job creation and Obama's polling numbers will dramatically improve.

What would make his strategy even sweeter, is that the policy he is considering was devised by a Mitt Romney adviser, Glenn Hubbard, an academic from Columbia University.

But many other prominent academics have been suggesting the same type of workout scheme such as "The Way Forward," which I wrote about last week. It was published by the New America Foundation, a think tank sponsored by Silicon Valley tycoons such as Eric Schmidt and Steve Jobs' widow Laureen Powell Jobs.

They made the case that the fragile recovery is sandbagged by the mortgage burden shouldered by millions whose house values collapsed because of the 2008 meltdown. They pointed out that in the U.S., 25% of homes are underwater (worth less than the mortgage) and if nothing is done, or interest rates go up, eight million more homeowners will default and lose their homes, negatively affecting the other 55 million mortgaged homeowners and values generally.

Their solution was that bank regulations be changed to allow the reduction of principal or the banks be allowed to rent these homes to owners with an option to buy, thus stabilizing the market.

Hubbard's plan is more sweeping and was devised with Chris Mayer who described to Congress a few weeks ago their proposal:

"Every homeowner with a GSE [Freddie Mac or Fannie Mae backed] mortgage can refinance his or her mortgage with a new mortgage at a current fixed of 4.20 percent or less... To qualify, the homeowner must be current on his or her mortgage or become so for at least three months... Other than being current, we would impose no other qualification or application, except for the intention to accept the new rate (that is, no appraisal, no income verification, no tax returns, etc.)."

The scheme would help 30 million mortgage holders up to $80 billion a year in payments, said Mayer. The cost would be "only" $242 billion a year divided between Washington and mortgage lenders. The $121 billion bill to taxpayers would be equivalent to the peace dividend resulting from the withdrawal of troops in Iraq and overall downsizing. It would be a fraction of what Washington did for Wall Street or the biggest banks.

Mayer said it would operate like a long-term tax cut for the heavily mortgaged middle class. The justification would be a spurt in consumer spending by these folks and economic growth for everyone.

If a "January surprise" occurs, the benefit would spread to Canada and will shift the political conversation south of the border.

The issue of "moral hazard" will rear its head again and Republicans like Romney will be in the position of railing against a program that benefits tens of millions devised by one of his own advisers.

On that issue, the Hubbard scheme would require the homeowners to give up some of their future upside and require the lenders to eat some of the losses.

If the "January surprise" happens, and momentum is building toward that, it just might prove to be checkmate for the president in November.

Add to that another "surprise," forecast by hedge fund manager Doug Kass, who believes that former Presidents Bill Clinton and George Bush will join forces to persuade the parties to unite and make the cuts needed to fix the fiscal mess.

If that "surprise" is added to the mix, it just might prove to be checkmate for all Americans.