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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