This week, a little known federal bureaucrat basically gave President Obama the middle finger. However, this little known bureaucrat, Federal Housing Finance Agency Acting Director Ed DeMarco, is the biggest obstacle standing in the way of our housing and economic recovery.
Unfortunately the response of the Obama administration only highlights how it's little talk, and no real action when it comes to fixing the housing crisis. On July 31, DeMarco told Congress and the Obama administration that he would not allow Fannie Mae and Freddie Mac, which hold almost half the mortgages in the country, to engage in targeted principal reduction for homeowners. DeMarco, a holdover from the Bush administration and the accidental head of FHFA, has ideologically and obstinately opposed principal reduction over and over again.
This is after it's been proven - and then buried and lied about within his own agency - that this program could immediately benefit more than 500,000 homeowners AND save taxpayers over $1 billion.
The Obama administration's response was a letter from Treasury Secretary Geithner declaring, "...as we have discussed many times, the use of targeted principal reduction by the GSEs would provide much needed help to a significant number of troubled homeowners, help repair the nation's housing market, and result in a net benefit to taxpayers."
While this strongly worded response is to be commended, it's a sad truth that the administration's public voice is not actually aligned with its real one. This voice, the one that has the pull and authority to get the work done--is silent. And the timing couldn't be worse.
Just over four years ago, Wall Street and big banks crashed the economy, causing home values to tank. Now over 15 million homeowners are underwater--drowning in debt to banks they shouldn't owe. This means that the money they have worked hard and saved for to buy their home to invest in their future, support their retirement, their kids' college funds, and any safety net is gone.
And this is the crux of a major election issue. The Washington Post and National Public Radio have already started to report that Presidential candidates need to address housing in swing states such as Nevada. Because with more than 15 million underwater homeowners, that's potentially more than 15 million voters who are watching how President Obama and Governor Romney will address this issue.
But that's just the tip of the iceberg. It's not just the millions of homeowners impacted--it's all of us. It's our neighborhoods that are destroyed by foreclosed homes. It's our communities that are deprived of hundreds of millions of dollars in revenue because too many homeowners have to unfairly pay the big banks instead of investing in local businesses.
So when DeMarco said no to principal reduction this week (again) and President Obama still didn't fire him, that sends the wrong message to all of us impacted by Wall Street's systematic fraud at the exactly wrong time.
President Obama--you have a short window to turn this around. Don't get lost in the mire of having to go back and forth with DeMarco. Fire or demote DeMarco - remove this block and nominate someone who will fight for principal reduction. Shake the trees loose at the Department of Justice, who has been reportedly holding back critical staffing resources into the federal task to investigate Wall Street Fraud force you announced during the State of the Union.
Do these two concrete actions and start publicly addressing how to hold Wall Street accountable (everyone but Wall Street loves that!) and really, truly, boldly, support millions of homeowners and everyday people whose lives have been systematically ruined by the big banks.
Over the next few months, you and Governor Romney will be competing for the votes of millions of people. The candidate that fails to seriously address Wall Street accountability, the housing crisis and our economy, will be the candidate that loses.
Follow Tracy Van Slyke on Twitter: www.twitter.com/@tracyvs
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| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
http://www.ocregister.com/articles/ameriquest-21363-million-lee.html
And the bit about "drowning in debt they shouldn't owe" is total BS. No one put a gun to their head when they took out a mortgage, and no one said that the bank would pay them back if home values declines. The myth that homes are "always supposed to appreciate" is garbage - and it is that kind of thinking that led to the housing bubble. Housing is just a market - and prices rise and fall and are determined by supply and demand. If the gov't makes banks reimburse homeowners for declines in value, will they make the homeowner pay the bank more if values go up?
This will only make the banks LESS willing to lend. Why would they want to make loans when they know that if the value drops they are on the hook for the decline - but if the value increases, they get nothing? Sounds like a terrible investment to me, and I can assure you that banks see it the same way.
Homes were being sold way over their true economic value vis a vis the rental market and relative incomes through subprime lending, flipping, getting rid of the paper by bundling it and selling it to investors all the while commissions and fees being generated in a wild game of musical chairs with a lot of unfortunate people naively getting caught in the mess.
The real value of these homes is beginning to emerge. It cannot be propped up artificially so now principle reduction is seen by some as a solution. Geithner's net benefit to taxpayers is code for my taxes going to the benefit of other persons who are homeowners that owe more than their homes are worth. Since we are already quite heavily taxed and running budget deficits, this also means more taxes. That net benefit Geithner refers to does not look all that good to many hard working people that did not get caught up in the bubble and its effects; especially in light of the fact that it does not seem that we are going to enact any remedies to minimizing this sort of herd mentality in the future.
The problem with democracy in America is that Americans are smart enough to clutch their money tight to their bosoms, but not smart enough to see the big picture. In other democracies, the elected government just does whatever it needs. Issues aren't in the papers and the forums forever, with politicians yapping back and forth. The party in power (parliamentary systems) just implements its program and takes its chances with the voters. Such countries tend to be much better governed.
Before we make the banks absorb the losses of those who bought high and sold low, maybe all the folks who bought low and sold high should be required to turn over the profits they made to the banks they think should absorb their losses.
Are we wanting America to become a country of failures?
In cases of genuine fraud, the banks should be punished. But our government lacks the backbone to punish the banks. (That is a wholly non-partisan statement. Both parties lack the cojones.)
Instead, we see a proposal to punish the successful and award the failures. I cannot agree with that.
I lost the print article I had (didn't have the Internet yet), but in November of 2007, JP Morgan hosted a series of talks by13 of the then 16 candidates (Kucinich, Gravel, and Ron Paul were expressly excluded - hmmmm) Each got 30 minutes to lay out their agenda. Based on subsequent events, Obama won the majority of their support depite Rupert Murdoch hosting a fundraiser for Hillary.
If anyone has a link to any article reporting this, please post it.
Federal Housing Finance Agency Acting Director Ed DeMarco is the man responsible for supervising Fanne and Freddie.
Is there anyone still sane enough to understand why DeMarco could not agree to increasing the insolvency of Fannie and Freddie.
Because the one single thing that Obama and the congressional interrogators will NOT support is a trillion dollar-plus bailout of Fannie and Freddie, even though both entitlement-program facilitators need bailouts of that dimension.