“Now If Congress Could See The Light”: A Fully Private Mortgage Market Is Good For Nobody
Let’s be clear about one thing: just about everyone agrees that the federal government is providing too much direct support to the mortgage market today. That support should be scaled back over time, but it cannot be eliminated entirely.
We believe, as do many others across the political spectrum, that a modest level of government support is necessary to promote a stable, accessible and affordable housing market. That includes an explicit guarantee on certain kinds of mortgage debt – but not the financial institutions that issue that debt.
Rather than keeping taxpayers on the hook for every dollar of loss on mortgage-backed securities – as we do now with Fannie Mae and Freddie Mac – we would rather see private capital take losses first. Financial institutions should have the opportunity to buy limited government insurance on those securities in exchange for a fair and financially responsible fee, much like the Federal Deposit Insurance Corp. offers on bank deposits.
Regardless of whether you own or rent, a government guarantee is critical to your economic well-being. Here are two reasons why.
First and foremost, the guarantee plays a crucial role in preventing and lessening the intensity of boom-and-bust cycles in the housing market. When private capital retreats from residential mortgages during a downturn, government-backed entities stay open for business, ensuring that money keeps flowing into housing. First-time homebuyers can still get a home loan. Homeowners can still refinance or find a buyer if they’re looking to move. Developers can still access the capital they need to start construction on new apartment buildings. Each of these activities sends ripples throughout the economy – new construction jobs, more demand for household goods, stronger and more stable home values – which improves everyone’s bottom line.
In the most recent example, purely private mortgage lending basically ground to a halt when the financial crisis began in 2008. Ever since Fannie Mae, Freddie Mac and the Federal Housing Administration have backed roughly 9 in 10 mortgages made in the U.S., saving the market from even worse collapse.
According to a recent analysis from Moody’s Analytics, a fully private market would have “difficulty providing stable mortgage funding during difficult financial times.” The authors concluded that “the resulting credit crunch further undermines housing demand, driving down prices and unleashing a vicious cycle.” That’s not good for anybody.
Second, it’s important to note that government-backed mortgages don’t just help homebuyers – who benefit from lower interest rates and access to longer-term, fixed-rate mortgage products. They also help the one-third of the U.S. population that rents.
In addition to their homeownership operations, Fannie and Freddie guarantee so-called “multifamily” mortgages, which finance apartment buildings with five or more units. That guarantee plays an important role in ensuring that quality, affordable rental options are available for low- and middle-income families. In 2009, the first full year of the financial crisis, Fannie and Freddie backed 85 percent of new multifamily mortgages; today that number is closer to 50 percent.
According to a recent analysis from Freddie Mac, if the government guarantee on multifamily mortgages were to go away, the market would shrink significantly. New construction on rental housing would plummet by as much as 27 percent, while average rents would rise by as much as 2 percent.
It’s clear that America’s families, regardless of their housing situation, benefit from an explicit, limited and paid-for government guarantee on mortgage debt. And a growing bipartisan consensus agrees: of the 25 plans for housing finance reform reviewed by the Center for American Progress, all but five preserve some sort of government guarantee.
Now, if only Congress could come to a similar agreement.
By: Andrew Jakabovics and John Griffith, Analysts at Enterprise Community Partners, U. S. News and World Report, August 13, 2013
“Camouflaging What They’re Up To”: GOP Bets Voters Aren’t Paying Attention To Their Obamacare Obstructionism
The House GOP leadership reportedly feels confident that they’ve defused the fanatical right’s push for a government shutdown fight over defunding Obamacare. The leaders apparently think that shutting down the government is, as a general matter, a bad idea because it tends to irritate voters who want those elected to govern to actually, you know, govern.
This prompts Greg Sargent to wonder why the GOP doesn’t get in more trouble for its general refusal to govern. The short answer, I think, is that Republicans think voters aren’t paying attention.
Sargent cites a new report from NRO’s Robert Costa outlining the House GOP leaders’ plans to avoid a shutdown and continue the battle to derail Obamacare. The latest idea: Demand an Obamacare delay in exchange for raising the debt ceiling (a legislative version of “delay Obamacare or the economy gets it”). Costa quotes veteran GOP pollster David Winston as saying that the GOP wants to avoid a shutdown because people expect them to govern.
Sargent writes:
The idea appear[s] to be that staging a shutdown to force the destruction of Obamacare — rather than offering an alternative — constitutes a failure to govern. But if that is so, why is not doing everything Republicans can to sabotage the law short of pushing for a shutdown, while offering no alternative, also a failure to govern?
I would think the answer is fairly obvious: A government shutdown is a high-profile and very unusual event and one that generally involves a fairly clear villain. If there’s a shutdown, it’s because one side is being obstinate – to wit, if House Republicans refuse to pass a bill to keep the government open without simultaneously defunding an existing law, they’ll be responsible for it regardless of how many times they claim that it’s Obama’s fault because he refuses to go along with their demands.
On the other hand, everything else the GOP is doing to make sure the law doesn’t work – from refusing to work on bills which would correct its faults to refusing to accept federal funding for a Medicaid expansion (Jonathan Chait has a great rundown of these tactics) – is not as eye-catching as a shutdown and falls into a different media narrative, one of generalized congressional gridlock. If Congress can’t pass a bill which would, to take an example from Chait, fix the law so it doesn’t force many church health insurance plans to disband, it’s easy to ascribe it to generalized gridlock (a pox on both their houses!) rather than GOP obstinacy in the larger context of a refusal to cooperate with the very routine legislative work of trying to fix a law’s problems.
Political junkies understand what the GOP is up to. But the party is gambling that medium- and low-information voters who couldn’t help but notice a shutdown won’t bother themselves with the ins and outs of daily governance (or lack thereof).
It seems a safe bet in the short term, but we’ll see whether voters figure it out as they actually start to tune in and get ready to vote next year.
By: Robert Schlesinger, U. S. News and World Report, August 13, 2013
“Martin Luther King’s Unfinished Business”: We All Have To Realize That Our Destinies Are Tied Together
On Aug. 28, 1963, Martin Luther King Jr. led a March on Washington that focused in part on economic equality.
“The Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity,” King said that day.
Fifty years later, the income and wealth gap for minorities is still wide and troubling. The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, according to the Pew Research Center.
And the Great Recession didn’t help an already bad situation. The average net worth of households in the upper 7 percent of the wealth distribution chain increased 28 percent during the first two years of the recovery from the downturn, compared with a 4 percent drop for households in the lower 93 percent, according to Pew’s analysis of data from the Census Bureau.
Another Pew report found that the decline in housing prices had a much greater impact on the net worth of minorities relative to that of whites, because housing assumes a larger share of their portfolios.
The Urban Institute’s Opportunity and Ownership Project recently issued a report that similarly examined the chasm that separates the haves and the have-nots.
In 2010, the average income for whites was twice that of blacks and Hispanics, $89,000 compared with $46,000. Whites on average had six times the wealth of blacks and Hispanics, $632,000 compared with $103,000, according to the Urban Institute.
But it’s the wealth gap that the authors of the report rightly focus on. Over the past 30 years, Americans in the top 20 percent saw their average wealth increase by nearly 120 percent, while families with wealth figures in the middle quintile saw growth of only 13 percent. The folks in the bottom 20 percent saw their net worth drop below zero, meaning their debts exceeded their assets.
“When it comes to economic gaps between whites and communities of color in the United States, income inequality tells part of the story,” the authors of the institute’s report wrote. “But let’s not forget about wealth. Wealth isn’t just money in the bank, it’s insurance against tough times, tuition to get a better education and a better job, savings to retire on, and a springboard into the middle class. In short, wealth translates into opportunity.”
The great wealth gap helps explain “why many middle-income blacks and Hispanics haven’t seen much improvement in their relative economic status and, in fact, are at greater risk of sliding backwards,” the report says.
Poverty rates for blacks and Hispanics seriously exceed the national average, according to the National Poverty Center. In 2010, 27.4 percent of blacks and 26.6 percent of Hispanics were poor, compared with 9.9 percent of non-Hispanic whites and 12.1 percent of Asians. About 38 percent of black children and 35 percent of Hispanic children live in poverty, compared with about 12 percent of white children.
“In hindsight, the organizers of the march were correct: Achieving rights without fully obtaining the resources to actualize them is only a partial victory. In this 50th anniversary year of the March on Washington for Jobs and Freedom, we can best pay tribute to the march and all that it stood for by recommitting to achieving its unfinished goals,” wrote Algernon Austin, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy. The institute has issued a series of reports examining what it would take to achieve each of the goals of the 1963 March on Washington. Go to www.unfinishedmarch.com to read the essays.
The Rev. Jesse L. Jackson has also stressed the need to “revive the movement to address this unfinished agenda.”
In looking at other economic measures, Jackson wrote in a recent Chicago Sun-Times commentary that African Americans are twice as likely to be unemployed as are whites. Affordable housing is still an issue, as is adequate public transportation that would help people get to jobs.
“We cannot afford to write off a majority of the next generation and still prosper as a great nation,” Jackson wrote.
When I write about the economic state of minorities, I brace myself for the racist, vitriolic comments that follow. Highlighting economic inequalities isn’t about asking for handouts. It’s about finding ways to give people a hand up so that they can become self-sufficient. When the financial lives of the less fortunate are lifted, we all are lifted.
As King said in his “I Have a Dream” speech that summer day 50 years ago, we all have to realize that our destinies are tied together. “We cannot walk alone,” he said.
By: Michele Singletary, Columnist, The Washington Post, August 13, 2013
“We’re Done Getting Mugged”: Hey Republicans, Obamacare Is Off The Table!
There’s an increasingly obvious problem with the efforts of GOP congressional leaders to tamp down “base” support for a “defunding Obamacare” drive linked to a continuing resolution to keep the federal government operating this fall: they’re talking about other measures to cripple Obamacare–e.g., a delay in key provisions like the individual mandate–perhaps linked to other “hostages” like the debit limit, instead of talking about using whatever leverage they have to achieve other Republican objectives.
On Wednesday I compared these leaders to a parent trying to bribe an unruly child demanding ice cream with a double scoop sometime later. But what if ice cream production has come to a halt? Can the kids be talked into gorging themselves on some other kind of sugary treat?
I don’t know, but at Salon, the exceptionally well plugged-in Brian Beutler thinks it’s time for Republicans to stop talking about ice cream:
Even in the dour days of 2011, when Dems were defeated, morose, and willing to negotiate away almost anything, major provisions of Obamacare were off the table. In 2013, almost everything is off the table. They’re done getting mugged by the GOP. Funding the government and increasing the debt limit are fundamental responsibilities of Congress, and Republicans won’t get more than a couple fig leafs for marshalling enough votes to accomplish them….
I can imagine Democrats putting something genuinely marginal to the ACA on the table. Like I said, a fig leaf. But not the individual mandate. Getting many people into the insurance exchanges, and particularly young healthy people, is crucial to the law’s success, and the mandate is the only stick they have (and it’s a pretty flimsy one) to prod them in there. Everything else is carrots. It’s conceivable to me that the inducements, and the national enrollment outreach effort, will be successful enough on their own to render the mandate ancillary in 2014. But postponing it is too big of a risk.
Republicans should know this. I think GOP leaders do know it, and for the sake of stability and a calming autumn, I sure hope they do. If they don’t, they’ll blunder into these discussions completely blind to how empty they’re about to come up. They’ll feel like they got rolled, when in reality they’ll have simply been mistaken about the terms of the negotiation. And that’s the only way I can imagine these crazed theatrics transforming into a genuine crisis.
If, of course, GOP leaders talk their firebrands out of a frontal assault on Obamacare that they really, really want to undertake on grounds that it’s more realistic to pursue delays that Democrats won’t agree to under any circumstances, then the consequences will go beyond a turbulent autumn in Washington. The GOP congressional leadership really will suffer a massive loss of grassroots conservative confidence, and you could be looking at a national party unmistakably under the heel of Ted Cruz.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, August 16, 2013
“The Eve Of Destruction”: Behind The GOP Curtain, The Year That Has Been, The Year That Is About To Be
It is almost impossible to find an establishment Republican in town who’s not downright morose about the 2013 that has been and is about to be. Most dance around it in public, but they see this year as a disaster in the making, even if most elected Republicans don’t know it or admit it.
Several influential Republicans told us the party is actually in a worse place than it was Nov. 7, the day after the disastrous election. This is their case:
The party is hurting itself even more with the very voters they need to start winning back: Hispanics, blacks, gays, women and swing voters of all stripes.
The few Republicans who stood up and tried to move the party ahead were swatted into submission: Speaker John Boehner on fiscal matters and Sen. Marco Rubio on immigration are the poster boys for this.
Republicans are all flirting with a fall that could see influential party voices threatening to default on the debt or shut down the government — and therefore ending all hopes of proving they are not insane when it comes to governance.
These Republicans came into the year exceptionally hopeful the party would finally wise up and put immigration and irresponsible rhetoric and governing behind them. Instead, Republicans dug a deeper hole. This probably doesn’t matter for 2014, because off-year elections are notoriously low-turnout affairs where older whites show up in disproportionate numbers. But elite Republican strategists and donors tell us they are increasingly worried the past nine months make 2016 look very bleak — unless elected GOP officials in Washington change course, and fast.
The blown opportunities and self-inflected wounds are adding up:
Hispanics. Nearly every Republican who stumbled away from 2012 promised to quit alienating the fastest-growing demographic in American politics. So what have they done since? Alienated Hispanic voters — again.
It is easy to dismiss as anomaly some of the nasty rhetoric — such as Rep. Don Young calling immigrants “wetbacks” or Rep. Steve King suggesting the children of illegal immigrants are being used as drug mules. But it’s impossible for most Hispanics not to walk away from the immigration debate believing the vast majority of elected Republicans are against a pathway to citizenship.
House Republicans are dragging their feet on immigration reform — a measure that most Republican leaders agree is essential to getting back in the game with Hispanic voters before the next presidential election. House leaders say there’s no chance they’ll bring up the broad measure that has passed the Senate. Instead, they plan a piecemeal, one-bill-a-month approach that is likely to suffocate comprehensive reform.
Some Republicans are praying that leaders will find a way to jam through something President Barack Obama can sign. But current signs point to failure. The House will be tied up all fall over fiscal issues — and there’s unlikely to be time to litigate immigration reform even if most members want to, which they don’t.
“If Republicans don’t pass immigration reform, it’ll be a black cloud that’ll follow the party around through the next presidential election and possibly through the decade,” warned Scott Reed, senior political strategist at the U.S. Chamber of Commerce.
African Americans. Republicans hurt themselves with other minorities by responding lamely — and, in some cases, offensively — to the Trayvon Martin case, and to the Supreme Court ruling that gutted Voting Rights Act protections.
“You can perform an autopsy until you’re blue in the face,” said Michael Steele, the former Republican National Committee chairman, now with Purple Nation Solutions. “But if the people you’re trying to reach have no faith or trust in the words you are saying, it doesn’t matter.”
It would be easy to dismiss Steele as bitter because he was forced out of the RNC and has feuded with his successor, Reince Priebus, since. But he has done something few Republicans have: risen to the top of American politics as a black Republican. On voting rights, Steele said, the party needs to actively deal with African-American complaints about voter suppression and impediments to voters’ registration. “We need to be saying: ‘We respect, yes, the rule of law. But we also respect your constitutional right to vote,’” he said. “We just can’t sit back and rely on, ‘Oh, gee, you know, we freed the slaves.’”
Steele was even more incensed about Republican reaction to the Martin case. “What African-Americans heard was insensitive,” he said. “Republicans gave a very sterile or pro forma response. There was no sense of even expressing regret or remorse to Trayvon’s mother.”
Republicans tell us privately that pressure from conservative media only encourages their public voices to say things that offend black audiences.
Gays. Polls show the Republicans’ traditional view is rapidly becoming a minority view in politics, but the party has done nothing this year to make itself more appealing to persuadable gay voters.
“We come off like we’re angry and frustrated that more of our fellow Americans aren’t angry and frustrated,” said a senior Mitt Romney campaign official who asked not to be named.
Republicans did show progress in the form of restraint, with many leaders offering a muted reaction to a pair of Supreme Court rulings related to same-sex marriage. In the past, many would have taken to the airwaves to condemn what they see as the crumbling culture around them. A number of top Republicans are counseling a more libertarian approach, letting people live their lives and letting states, or better the church, set the rules for marriage at the local level.
Swing voters. Republicans are in jeopardy of convincing voters they simply cannot govern. Their favorable ratings are terrible and getting worse. But there is broad concern it could go from worse to an unmitigated disaster this fall. Most urgently, according to a slew of key Republicans we interviewed, conservative GOP senators have got to give up their insistence that the party allow the government to shut down after Sept. 30 if they don’t get their way on defunding Obamacare.
The quixotic drive — led by Rubio, Sen. Ted Cruz (R-Texas) and Sen. Mike Lee (R-Utah) — is part of Rubio’s effort to make up with the conservative base after he was stunned by the backlash over his deal-making on immigration. Pollsters say the funding fight makes Republicans look even more obstructionist and causes voters to worry about the effect a shutdown would have on their own finances.
Whit Ayres of North Star Opinion Research, who has been drilling down on this issue for the conservative public-opinion group Resurgent Republic, said: “Shutting down the government is the one way that Republicans can turn Obamacare from a political advantage to a political disadvantage in 2014.”
By: Jim Vandehi and Mike Allen, Politico, August 16, 2013
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