A most dastardly deed occurred last Friday when the Obama administration issued a 29-page policy statement totally abandoning the federal government's time-honored role in helping Americans achieve the goal of homeownership. Instead of punishing the banks that sabotaged the American ideal of a nation of stakeholders by "securitizing" our homesteads into poker chips to be gambled away in the Wall Street casino, Barack Obama now proposes to turn over the entire mortgage industry to those same banks.
The proposal, originated by Treasury Secretary Timothy Geithner, involves nothing less than a total "winding down" of the 80-year-old federal housing program, setting instead a new goal of a two-tiered America in which the masses are content to be mere renters of the American Dream. Such a deal for a country where, as the report concedes, "Half of all renters spend more than a third of their income on housing, and a quarter spend more than half."
This is the same Geithner who during his tenure in the Clinton Treasury Department championed the total deregulation of the then-emerging market in collateralized debt obligations that sliced and diced people's home mortgages into the toxic securities that created what his new report calls the greatest economic crisis since the Great Depression. Later, as president of the New York Fed, he cheered on the banks as they went hog-wild, conning folks into buying homes they couldn't afford and stuffing them into the incomprehensible securities that form the rot at the core of our bankrupt economy.
This is a made-in-the-U.S. nightmare that we inflicted on the world, thanks to an explosion in those toxic securities brought on by the deregulation that most of the Obama economic brain trust supported when they worked for President Bill Clinton and during the ensuing bubble years when they enriched themselves. As the report admits: "The U.S. is ... the only high income country in which securitization plays a major role in housing finance." Yet instead of ending that practice Obama now calls for more of the same: "The Administration believes the securitization market should continue to play a key role in housing finance." Indeed, the plan's goal of eliminating Fannie Mae and Freddie Mac will dry up the alternative public funding that has provided a source of mortgage support ever since President Franklin Delano Roosevelt launched Fannie Mae to check the power of the banks over mortgages. Now Obama proposes to eliminate that check and leave would-be homeowners to the tender mercy of the banking giants.
Of course Fannie Mae and Freddie Mac also bear responsibility for the meltdown. They had morphed into for-profit enterprises and, just as with the Wall Street firms, the massive bonuses paid out to their top executives were contingent on the value of their stock prices, which in turn were fattened by the sale of those same toxic assets. As the Obama report puts it, "Fannie Mae and Freddie Mac's profit-maximizing structure undermined their public mission." What the administration should have proposed is to return the government-sponsored housing agencies to their original function as nonprofit entities supplementing, rather than aping, the practices of greedy bankers.
It wasn't meant to end this way, and key Democrats, quite a few of them Clinton alums now in the Obama administration, bear the responsibility for the sad fate of Roosevelt's dream. As the Obama proposal concedes: "Improving how housing was financed was an important part of these broader Depression-era reforms. In the 1930s, following severe mortgage market disruptions, widespread foreclosures, and sinking homeownership rates, the government created the Federal Housing Administration (FHA), Fannie Mae, the Federal Home Loan Banks (FHLBs) and several decades later, Freddie Mac to help promote secure and sustainable homeownership for future generations of Americans. Fannie Mae and Freddie Mac held true to their original mission for many years." What the report then neglects to discuss is the demise of Roosevelt's grand experiment at the hands of Democratic Party hustlers who turned the agencies away from their "original mission" and into their personal piggy banks while getting Democrats in Congress to approve regulations enabling their greed.
The folks around President Obama know this sad tale well because some of them were principal actors in the housing agencies' betrayal of the public trust. Just take the case of Tom Donilon, whom Obama recently appointed to the highly sensitive position of national security adviser. It was Donilon who was the top legal counsel and lobbyist for Fannie Mae from 1999 to 2005, a period when the agency went off the tracks in backing Countrywide and other private-sector bandits in their irresponsible rip-off scams. "He was in charge of the lobbyists. ... That process involved using the Hill to rein in the regulators," noted Stephen Blumenthal, who, as director of the Office of Federal Housing Enterprise Oversight, was hindered by Donilon's lobbying. As the report concedes without mentioning Donilon's role, "Over the years, Fannie Mae and Freddie Mac's aggressive lobbying efforts had successfully defeated efforts to bring them under closer supervision."
Donilon, who received $10 million in the three years leading up to the scandal of 2004, when Fannie Mae was fined $400 million for juggling its books to enhance executive bonuses, will never have any trouble financing a home purchase. Not so the tens of millions of Americans who have lost their homes because of his reprehensible actions and the many more in the future who will be denied government support in trying to get a place of their own.
We do not need to take "vengeance". We just need to look at restitution and put a few hedge fund
"managers" and investment bankers in jail. Fraud is criminal and actionable.
What remains intolerable is the system that continues to reward the negligence of the large banks. The CEO's testified to the Congressional investigators that they were "surprised" by the consequences of a housing bubble they were investing in.
Thank you Mr. Sheers! Please lead the charge. Name names!
Trouble is...the CEO's are winning. And attitudes like "govt doesn't need to encourage" is contributing to the CEO triumph. Congratulations!
It is only AFTER the bankers destroyed themselves (by repacking mortgages into investment tranches mixed with credit default swaps) that the government ended up stepping in TO SAVE THE BANKS, not the poor folks.
What sabotaged the housing market was massive defaults by homeowners. Securitization made it possible, and highly profitable, to be extending loans to uncreditworthy borrowers, but it was defaults by the borrowers that brought the house of cards down.
If we were still a nation of prudent homeowners, diligently making their mortgage payments each month, we would have no housing meltdown even if securitization continued full bore. Fanny and Freddy are just securitizers anyway.
Do some more homework on this before you jump in.
Nope, all of those laid off, jobless people did it on purpose because they are just irresponsible losers.
You, Kurfco, are an idjot who cannot see the forest for the trees.
For those who bought a house, or refinanced a house, with less than 20% equity -- regardless of what the lender would let you get away with -- I would term imprudent. There are lots of things someone will sell you that you are imprudent to buy. A low or no down payment mortgage is one of those things. Now an entire generation has learned that lesson.
When you buy a house with 2% down, you have leveraged it 50:1!
The bailouts were a terrible thing but happened for a simple, fundamental reason -- that will always recur. Simple example. If you go to the bank, borrow $1,000 and get into trouble, the bank will go after you for the money. If you borrow $100 million and get into trouble, they will work with you.
My point to Scheer is that the precipitating event for this whole mess was not securitization, as he claims. It was the chain of defaults by borrowers -- for whatever reason -- that started the run in the panty hose.
Fannie and Freddy were converted into privately owned companies in 1968, long before the seeds for the mortgage meltdown were planted. Why should anyone be sorry to see the back of these two entities?
The sooner people realize that we live in a Plutocracy (even according to Citi bank: http://www.scribd.com/doc/6674234/Citigroup-Oct-16-2005-Plutonomy-Report-Part-1) the sooner our demands will turn into actions.
Contd:
4. Other Countries - India. Latin America. Southern Europe - and their rural population s, land owners, farmers for generation s, are losing their Land one way or another, through these same Western Corporate entities.
We can talk all we want about Space and other Planets, but that slogan - Buy Land. They ain't making any more - Rings alarm bells now.
We can talk about how great Freedom & Rights & Democracy happening in Egypt and around the Arab world is and how wonderful - And we will be correct. Coming in to Democracy, to Politics, now, in the 21st Century, they might be able to get a better deal than the Middle Class/Poor in Western countries/1st World Nations and avoid all the white collar criminals, the bullies & pit falls we are faced with today.
Democracy is at the crossroads. Living cant continue to be made exclusive to those who make the rules and can afford to Live.
With moves like this from Timothy Geithner and a President like Barack Obama, it is essentially the Middle Class against the Middle Class. And back to the stone age of Old India's Caste system, a la Richard Florida for the 21st Century.
There has to be another way, a better way to share what this Planet has.
Cute slogan. Very 60s.
And
Not long ago we wrote that with regards to the Israeli Palestinian problem.
We read it somewhere, sorry cannot recall original author.
And now strangely, this seems to be a pattern. Part of the same mind set, the same attitude, of a number of people in the Corporate Class, that small clique of Elites, neo-cons most, currently either running or strongly influencing things in their favour. All over the Planet.
And now it's not just a cute slogan anymore!!
:(
1. Richard Florida - he of the "Creative Class" institute - is some one else who believes most people should not own but rent or lease. It's one of his most favourite things he is often caught espousing.
Next to talking about a "Service" class. 'Specially at private gatherings.
2. ULI - The Urban Land Institute - in DC is another group that put out a paper we saw, something about "Land in the hands of the uneducated" which also mentions other Common Goods - Water etc. Same thing. Only they and their members are good enough to own.
3. A number of Think Tankers share the same vigourous thoughts: No way should the Middle Class /the Poor have home ownership. Renting is better for them.
4. Other Countries - India. Latin America. Southern Europe - and their rural populations, land owners, farmers for generations, are losing their Land one way or another, through these same Western
:)
Now we're curious, nice of you to let us know, will try track the original owner.... Thanks again!
And now we're in that - rock & hard place - thing!!
:(