Speaking in Phoenix on Tuesday, President Obama associated himself with a bipartisan proposal to slowly get Fannie Mae and Freddie Mac out of the business of backing mortgages. According to the plan, formulated in the Senate, a new federal agency called the Federal Mortgage Insurance Corporation would backstop banks and other private investors against catastrophic mortgage losses, but only after they had run though their own substantial capital first.
With Occupy Our Homes—the growing movement to fight foreclosures and evictions—community organizations and Occupy activists have teamed up in cities throughout the country to defend at-risk homeowners, pressure banks to renegotiate mortgages, and keep families in their homes. This effort has resulted in some impressive local victories. At the same time, the scope of the foreclosure crisis calls out for federal remedies.
We’re entering the 99 percent spring, with escalating actions starting across the country next Tuesday targeting America’s biggest tax dodgers. On April 24, shareholder actions will begin at General Electric, Wells Fargo, Bank of America, and dozens of other corporations. Americans are renewing the fight to fix our economy and to hold the big banks accountable for the misdeeds that have left millions out of work and out of homes.
The SEC Doing Wall Street’s Bidding Robert Kuttner
In the right-wing revisionism of what caused the financial collapse, Fannie Mae and Freddie Mac are leading villains with the federal Community Reinvestment Act in a supporting role. Supposedly, Fannie and Freddie lowered their standards, purchased lots of subprime mortgages, and were major contributors to the housing bubble and crash. In this fable, government pressured banks to make unsound mortgage loans to meet the goals of CRA.
I happened to be flying on American Airlines the morning after the company declared bankruptcy. Exactly nothing bad happened to my flight. Nobody passed the hat to buy aviation fuel. The flight attendants offered the same dismal snacks. It was business as usual.
American will get to stiff its creditors, its employees, its pensioners, and sail happily onward, not even required to replace its managers. Chapter 11 filings are standard operating procedure when necessary in corporate America. In its full-page ads promising no disruption of service, American managed to avoid even the word "bankruptcy."
In response to Adam Serwer's piece on how Washington, D.C., has changed over the last decade ("A City Divided"), reader Nick Sementelli writes: "As a white, young professional who has successively migrated east over my six years in the city (from Georgetown to Shaw to Bloomingdale), I'm squarely in the center of the 'gentrification' phenomenon, and I'm eminently familiar with both the tensions these changes foster and the confusion/guilt my peers and I struggle with in how to approach them.
The Obama administration released it's plan for unwinding Fannie Mae and Freddie Mac today, and offered a set of alternatives on how to replace it. But the big takeaway is that the government will basically stop promoting homeownership, and it will likely especially remove incentives for reaching low-income families who might not otherwise be able to afford one:
Taken together, these measures would directly affect borrowers, by increasing the costs of buying a home. That would also make the loans more profitable and perhaps draw new competition from private firms.
Soon-to-be House Oversight Committee Chairman Darrell Issa's savvy communications staff strikes again; Politico recently "obtained" a list of the Congressman's widely-anticipated investigations, set to kick off when he officially takes over his committee this week. While most of the agenda won't surprise -- subjects set for scrutiny include Wikileaks' release of documents and "how overregulation has hurt job creation" -- I wanted to draw attention to this:
Joseph A. Smith, formerly North Carolina's Bank Commissioner, is the White House's nominee to run the agency that regulates federally-owned mortgage giants Fannie Mae and Freddie Mac, but he's facing some trouble: If the Senate confirms him for the job, he might adopt policies to help consumers, and that's enough to lead some Republicans to begin another round of obstruction.
Perhaps the best response to last week's Republican "presponse" to the Financial Crisis Inquiry Commission comes from the New York Times' Joe Nocera, who focuses on commission member Peter Wallison:
The only problem with Mr. Wallison’s theory is that it’s not, as they say, reality-based. Anyone who has looked at the role of Fannie and Freddie will discover they spent most of the housing bubble avoiding subprime loans, because those loans didn’t meet their underwriting standards. (Indeed, for most of their existence, Fannie and Freddie didn’t so much meet their affordable housing goals as gamed them.)
Elizabeth Warren, the White House/Treasury aide charged with setting up the Consumer Financial Protection Bureau, is spending the day in Ohio to attend a consumer roundtable in Columbus. She'll talk with people about their financial concerns as part of outreach efforts surrounding the stand-up of the new agency.