The problem isn’t Ed DeMarco

Neil Barofsky on why Ed DeMarco won’t be fired — and why he’s not the real problem with the Obama administration’s housing policy, or the economic fallout. Tim Geithner is, and ultimately, President Obama, who stands behind him:

Now, three years later, with a tightening presidential election and a Democratic base disillusioned by the government’s abandonment of its promise to help homeowners (less than 8 percent of the funds originally allocated in TARP for foreclosure relief has actually been spent), Geithner and the administration would like to present themselves as having undergone a conversion.

Let’s be very clear about what is going on here. This is not a conversion – it is a political convenience. Geithner may well be correct when he wrote in a letter to DeMarco that an effective principal reduction program would “help repair the nation’s housing market” and that the refusal to do so is not “in the best interest of the nation,” but it is his own policies that are primarily to blame for where we are today.

As we enter the final phase of the election campaign, we need to end the meaningless political posturing and recognize that as a country we have severely mishandled the housing crisis. It may be a fair debate whether we should have gone with the “all in” approach that I and others have advocated or the “do nothing and let the market find its natural bottom” approach advocated by many conservatives. There should, though, be little question that the chosen policy – a “foam the runway” approach that assisted the banks and only a fraction of the homeowners that could have benefited – has been a failure and has left us stuck in economic mediocrity. Geithner wrote this week to Demarco: “You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis.” If only he had heeded his own advice.

That’s right. Let’s call this what it is: a distraction. The administration has given nothing but lip service to the consumer side of the housing crisis, and in doing so, deepened and extended the economic crisis. They picked a side, and it was the bankers, not us. This wasn’t something the Republicans made them do: President Obama and Tim Geithner had the power to fix this. They still do.

I’ve written about Guy Saperstein before. Guy is a retired civil rights attorney who was listed as one of the Top 100 Lawyers In America, a major Democratic donor, part-owner of the Oakland A’s and a past president of the Sierra Club Foundation, and originally an enthusiastic Obama supporter. He says it’s time to squeeze Obama – not just over Ed DeMarco, but over the same housing policies Tim Geithner and President Obama have designed. The listserv email he sent is too long, so I’ll pick the most pertinent parts:

While it is comforting to believe the Obama Administration wants to do the right thing, there is too much evidence to the contrary. If the progressive community is serious about protecting home ownership as a core component of the American Dream, it needs to change tactics and raise the ante. And there is no better time to do so than in the middle of an election campaign. In fact, it is likely that if we don’t do it now, when the election is over we will have no leverage at all.

He then goes into the background of various “roads not taken” by the administration, and how they worked to undermine any progressive remedies. Oh dear, moral hazard!

This all would be bad enough, but it gets worse: The Obama Administration is still protecting banks, servicers and investors—at great cost to homeowners and home ownership. While more and more homes go into foreclosure, banks are not putting them back on the market, but are bundling and selling them to hedge funds, which are converting them to rentals. Banks and loan-servicers are subverting home ownership, while profiting from rentals, excessive late fees and foreclosure fees, while the federal government does nothing to stop the profiteering or provide serious protection for homeownership.
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Another mass shooting

Now, here’s the thing. Far too many Americans will scan this, see “Detroit” and “hip hop”, and stop reading. “Who cares when black people get shot?” is a common reaction. “It’s not in my neighorhood.”

The easy availability of guns is a big factor in the deterioration of our inner cities. This time, adult party goers – the next time, kids hit by stray bullets. And this is why Mayors Against Illegal Guns are pushing for sensible gun laws. But those who continue to make a fetish out of the 2nd Amendment stand in the way of rational solutions:

A woman who was on the Detroit Princess riverboat went to her car after getting on shore, retrieved a gun and opened fire early Monday, hitting four of her relatives and friends, officials say.


Another family member who wasn’t on the boat returned fire, critically injuring the shooter’s boyfriend as they were driving away.


Officials with the Detroit Princess say the shooting occurred around 1:15 a.m. on the shore near the boarding area behind Joe Louis Arena. An employee of the Detroit Princess was also shot in the foot and required two stitches, said Chris Clarke, general manager of the Detroit Princess.

‘No matter how long we’re here, we’re just not American enough’

I happened to catch this on Viewpoint with Eliot Spritzer last night, and I thought it was really powerful. Zafar is right: What, exactly, do American Muslims have to do before they’re American “enough”?

Harris Zafar, national spokesperson for the Ahmadiyya Muslim Community USA, and “Viewpoint” host Eliot Spitzer discuss the possibility that the gunman behind the mass shooting at a Sikh temple in Oak Creek, Wis., actually intended to target Muslims and whether a rise in anti-Muslim sentiment is linked to political rhetoric.


“The Republican primaries were ridden with such incidents where Mr. Santorum, Herman Cain, Michele Bachmann repeatedly spread this message of fear of Muslims, fear of Shariah law,” Zafar says. “It’s really given us this impression that we’re not American enough. No matter how many generations we’ve been here, we’re just not American enough.”

Hypocrisy, thy name is Tim

Money talks, bullshit walks. My goodness, the administration is speedwalking lately! Neil Barofsky on why Ed DeMarco won’t be fired:

Although one can argue whether principal reductions are the right way to address the ongoing housing slump – I have championed principal reductions for years but acknowledge that there are passionate arguments on both sides of the issue – no one should be fooled that the administration’s entreaties to DeMarco are anything but political posturing. As I recount in my recently released book, Bailout, during my time as the special inspector general in charge of oversight of the TARP bailouts, Treasury Secretary Timothy Geithner, using the same justifications now offered by DeMarco, consistently blocked efforts to use TARP funds already designated for homeowner relief through a principal reduction program that could have a meaningful impact on the overall economy.


For example, in 2009, $50 billion in TARP funds had been committed to help homeowners through the Home Affordable Modification Program (HAMP), a program that the president announced was intended to help up to 4 million struggling families stay in their homes through sustainable mortgage modifications. Hundreds of billions more were still available and could have been used by the White House and the Treasury Department to help support a massive reduction in mortgage debt. But Geithner avoided this path to a housing recovery, explaining that he believed it would be “dramatically more expensive for the American taxpayer, harder to justify, [and] create much greater risk of unfairness.” Treasury amplified that argument in 2010, after it reluctantly instituted a weak principal reduction program in response to overwhelming congressional pressure. That program incongruously left it to the largely bank-owned mortgage servicers (and to Fannie and Freddie) to determine if such relief would be implemented. In response to our criticism that the conflicts of interest baked into the program would render it ineffective unless principal reduction was made mandatory (when in the best interests of the holder of the loan), Treasury reinforced Geithner’s early statements, refusing to do so primarily because of fears of a lurking danger: the ”moral hazard of strategic default.” The message was clear: No way, no how would Treasury require principal reduction, even when Treasury’s analysis indicated it would be in the best interest of the owner, investor or guarantor of the mortgage.


Indeed, at every critical juncture at which Treasury could have unilaterally implemented meaningful principal reduction, the same argument now presented by DeMarco was hauled out as an excuse for inaction.


Which is why it should not be surprising that rather than engage in bold action, such as replacing DeMarco with a recess appointment, the administration has responded with only a letter that seems primarily intended to distract attention from its own failed policies. The truth is that the administration – whether through principal reduction or otherwise – has never prioritized coming up with an effective approach to helping homeowners and reviving the housing market, even when it had a multi-hundred-billion-dollar TARP war chest at its disposal.


By late 2009, it was becoming apparent that HAMP would never come close to its stated goals. The program was designed poorly, and Treasury refused to hold the banks accountable for the abuses to which they subjected homeowners in the program. In one meeting I attended, after Secretary Geithner was pressed about the flaws in the HAMP program, he justified Treasury’s actions by explaining that the program would “foam the runway” for the banks by extending out the foreclosure crisis over time. In other words, Treasury was far more concerned with using HAMP to soften the blow of the housing crisis for the banks – just as the FAA once recommended spreading protective foam over a landing strip to prevent a disastrous crash of a malfunctioning airplane – than with helping millions of struggling homeowners. Now, three years later, with a tightening presidential election and a Democratic base disillusioned by the government’s abandonment of its promise to help homeowners (less than 8 percent of the funds originally allocated in TARP for foreclosure relief has actually been spent), Geithner and the administration would like to present themselves as having undergone a conversion.


Let’s be very clear about what is going on here. This is not a conversion – it is a political convenience. Geithner may well be correct when he wrote in a letter to DeMarco that an effective principal reduction program would “help repair the nation’s housing market” and that the refusal to do so is not “in the best interest of the nation,” but it is his own policies that are primarily to blame for where we are today.


As we enter the final phase of the election campaign, we need to end the meaningless political posturing and recognize that as a country we have severely mishandled the housing crisis. It may be a fair debate whether we should have gone with the “all in” approach that I and others have advocated or the “do nothing and let the market find its natural bottom” approach advocated by many conservatives. There should, though, be little question that the chosen policy – a “foam the runway” approach that assisted the banks and only a fraction of the homeowners that could have benefited – has been a failure and has left us stuck in economic mediocrity. Geithner wrote this week to Demarco: “You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis.” If only he had heeded his own advice.

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