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“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

August 18, 2013 Posted by | Financial Institutions, Home Owners | , , , , , , | Leave a comment

“A Monster Of GOP Creation”: Now Newt May Get Even Nastier

Thirty-four years ago, Newt Gingrich summed it up. In a speech to College Republicans—shortly before he would win his first election to Congress—the future speaker had a piece of fundamental advice for the young and impressionable GOPers: “I think one of the great problems we have in the Republican party is that we don’t encourage you to be nasty. We encourage you to be neat, obedient, and loyal, and faithful and all those Boy Scout words.”

Nasty—that was a critical component of Gingrich’s formula for political success. And through the 1980s and 1990s, as Gingrich wielded his nastiness to overturn the Democratic order in Congress and seize the people’s House for the GOP, he was hailed by Republicans. Now, following his 47 to 32 percent loss to Mitt Romney in the Florida presidential primary and Gingrich’s promise—make that, threat—to pursue this nasty nomination contest all the way to the convention in sweltering Tampa in August, the Republican Party has a monster-of-its-own-creation in its china shop. (Imagine a Tasmanian devil in Tiffany & Co.) Despite Romney’s 15-point comeback victory, it seems that the GOP will still be burdened and discombobulated by the Wrath of Gingrich. During his concession speech Tuesday night—which was light on the concession—Gingrich vowed to contest every primary and caucus, as his supporters held up signs that said, “46 STATES TO GO.”

It’s not uncommon for political losers to hang on longer than they should. (See Rick Perry.) So Gingrich’s vow to ignore the play-nice-and-get-out pleas of the Republican establishment and battle all the way to the summer is not surprising. But if he is serious about vengeance, he will have to cling on for longer than a week or two. February’s primaries—Nevada and Maine (February 4); Colorado, Minnesota, and Missouri (February 7); and Arizona and Michigan (February 28)—hold few opportunities for the goblin of Georgia. These states are Romney-friendly and not well-suited for Gingrich’s fire-breathing and not-so-coded rants against food stamps and Saul Alinsky. If he wants Romney’s blood, he will have to stay in the hunt until at least Super Tuesday, where he can try to work his dark magic on his home state of Georgia, Oklahoma, Tennessee, and Idaho. Alabama and Mississippi come a week later.

This means another five or six weeks at least of Gingrich’s  not-so-creative destruction, with him hurling his patented nastiness at  Romney—and Romney both firing back and, more important, trying to keep  up with Gingrich’s extreme anti-Obamaism.

The latter may be more of  the problem for Romney than Gingrich’s direct slams on him. Candidates  often pound at party comrades during hard-fought nomination contests,  and the winner, even though dinged, usually ends up able to compete  effectively in the general. (Barack Obama survived Hillary Clinton’s  barbs.) But Gingrich is dragging Romney to the right in terms of, yes,  nastiness. (During his victory speech in Tampa, Romney declared that Obama represents “the worst of what Europe has become”—of course, without explaining what that meant.)

The GOP primary electorate is in a foul mood. Many of  these voters seem to want a candidate who feels their hatred for the  president. (See Rick Santorum’s exchange with  that lady who maintained Obama is a Muslim.) This whole primary  campaign has been a game of revolving Obama-loathers. While Romney has  tried to come across as not a hater—he’s disappointed in Obama;  he doesn’t despise him—one by one, fire-breathing Obama-bashers who  represent the dark and angry mood of their party’s base have risen to  be the non-Romney of the GOP race, only to fall down due to their own  limitations. And Gingrich is the last of these. (Ron Paul is  essentially operating in an alternative universe; Rick Santorum is  running on the fumes of Iowa.)

With his mean-spirited and extreme  rhetoric, the former House speaker does embody the soul of his party at  this point. Though Gingrich is burdened with a ton of baggage that  obviously undermines his chances to win a general election—and many  Republican voters do care about that—Romney still has to ensure that  Gingrich does not run away with the hearts of GOP voters. Consequently,  he has to keep the meanness/Obama-hatred gap that exists between  him and the former Freddie Mac historian/consultant/strategic adviser from becoming too wide. Yet doing so makes Romney less acceptable to those fickle independent voters  who yearn for candidates who can solve problems in Washington without partisan fighting. If Romney has to engage in such  Newt-neutralization for weeks, if not months, he will further define  himself in a manner likely to alienate independents and  middle-of-the-road voters.

There’s an old-saying: Don’t get into a  fight with a skunk; you’ll only come out smelling. Romney cannot remain  in combat with Gingrich—even if he continues to win delegates—without  being tainted by the stench of this skirmish.

Gingrich’s  nastiness—now aimed at Romney—is an accurate reflection of the  Republican Party. In recent years, Gingrich-style extremism has become  its norm. Sarah Palin (who has been egging on Gingrich) claimed during  the 2008 race that Obama had been “palling around” with terrorists. When  the Democrats were poised to pass a health care reform bill in the  House, GOP leaders of that body sponsored a Tea Party rally, where  demonstrators chanted “Nazis, Nazis” in reference to the Dems. Donald  Trump made GOP voters swoon with his birther talk. Gingrich himself  claimed that Obama could only be understood as a fellow who  holds a Kenyan, anti-colonialist view of the West. Death panels, a  government takeover of the health care system, socialism—it’s been nasty  for years in GOPland. Romney’s challenge is to win over these people,  without fully endorsing the malice. (Thus, Obama=Europe.)

Now on the receiving end of vicious blasts, Gingrich has taken to whining that he’s the victim of  lies and extreme attacks. After all his years of practicing gangster  politics, he hardly warrants sympathy. (And many of Romney’s assaults on  him have been accurate.) But he also has been trying  mightily in recent days to depict himself as the personification of the  conservative movement, arguing that an attack on him (by  Romney, the Republican establishment, or the media) is an attack on the tea party. (This is a right-wing version of identity politics.) And he’s  been saying that the conservative movement simply won’t stand for a “Massachusetts moderate”—or a “liberal” who supports abortion rights and  gun control, as he dubbed Romney this week—as the Republican Party  nominee.

It’s his last play—to try to ignite a civil war within  the GOP. At the moment, with the smell of his Florida defeat still in  the air, he seems rather serious about this endeavor. With his own  record of flip-flops and his less-than-inspiring personal history, he’s  certainly not the perfect leader for such a crusade. But if the  dissatisfaction on the right is deep enough, perhaps he can be a  sufficient vehicle.

Notwithstanding the loss in Florida—and with  only 5 percent of the GOP delegates selected—Gingrich is still  positioned to inconvenience, if not undermine, Romney. And he has  choices. Will he try to rally conservative foot soldiers and lead a  Pickett’s Charge against the front-runner, hoping to do better than Lt.  General James Longstreet? Or will he go the way of a suicide bomber and  become the doomsday device of the GOP?

With his Florida success,  Romney is back on that path to the nomination. But Gingrich is a problem  for the front-runner and the entire GOP establishment—and that’s  because he’s following the scorched-earth playbook that he long ago  developed for the party and that the party has embraced for years.

 

By: Davis Corn, Washington Bureau Chief, Mother Jones, January 31, 2012

February 2, 2012 Posted by | Election 2012, GOP Presidential Candidates | , , , , , , , | Leave a comment

A “Historian” By Any Other Name: Freddie Mac Hired Newt Gingrich As It Reshaped Strategy

Within months after taking over as chief lobbyist at mortgage lender Freddie Mac in 1999, Mitchell Delk hired a prominent Washington insider to advise him on how to build support among conservatives on Capitol Hill: Newt Gingrich, the former speaker of the House of Representatives.

A key part of Delk’s strategy, as outlined in Federal Election Commission records, was to build goodwill in Congress by holding fundraising events for influential members of House and Senate committees that had oversight of Freddie Mac.

Gingrich had experience in such matters as an architect of GOPAC, one of the Republican Party’s most important political action committees.

Gingrich’s activity at Freddie Mac has been under scrutiny during his run for the 2012 Republican presidential nomination, as rivals have accused him of lobbying for Freddie Mac.

The former speaker has rejected such allegations, and his first $300,000-a-year contract with Freddie Mac, released this week by his campaign, states that he would not “engage in lobbying services of any kind.”

But the contract, together with the FEC records describing Delk’s revamping of Freddie Mac’s lobbying shop, sheds light on how Gingrich could avoid the lobbyist label and still be valuable to the mortgage lender as a strategist.

Gingrich’s contract says the former House speaker would work with Delk and other Freddie Mac officials on “strategic planning and public policy.”

And, it calls on Gingrich to contribute to the lender’s “corporate planning and business goals.”

“He was a consultant for us, and … not a lobbyist,” Freddie Mac spokesman Doug Duvall said, declining to comment further on the lender’s arrangement with Gingrich.

Gingrich’s campaign has offered few specifics about his work for Freddie Mac, for which he earned as much as $1.8 million during two contract periods. It said late last year that part of his job was to help Freddie Mac build bridges to conservatives.

He has called himself a “historian” who advised the mortgage lender on issues such as its lending policies.

Gingrich joined Delk’s government affairs shop at a time when the former Freddie Mac senior vice president was hiring several former members of Congress and congressional aides for his lobbying team.

At the time, conservative Republicans on Capitol Hill were seeking regulations to rein in the profits of government-sponsored lenders such as Freddie Mac.

Delk, who did not respond to phone calls seeking comment, successfully fought back against such legislation by hiring dozens of outside consultants and spending as much on lobbying as many major corporations.

FEC INVESTIGATION

However, his lobbying team came under investigation by the FEC in 2003.

The FEC probe found that under Delk’s guidance, Freddie Mac improperly used corporate resources to put on 85 fundraising events that raised about $1.7 million for federal candidates.

The majority of the events were for Republicans, the FEC found.

FEC investigators concluded that at least one major contribution to a Republican entity came directly from Freddie Mac funds and that some fundraisers were held in Freddie Mac’s offices – both violations of FEC rules.

In 2006, Freddie Mac agreed to a $3.8 million settlement for violating federal election rules, the largest civil fine the FEC had ever levied.

Delk, who resigned from Freddie Mac in 2004, was not charged in the case. Delk’s lawyer in the case, Ken Gross, said Gingrich’s name “never came up in connection with (the FEC) case.”

Vin Weber, a former Republican representative from Minnesota who also was hired as a Freddie Mac consultant, said he never worked directly with Gingrich on Freddie Mac matters.

He said the mortgage lender did not want congressional arm-twisting but hoped to “create a positive buzz for Freddie Mac.”

Weber said someone like Gingrich could provide an important service without lobbying.

“I wouldn’t ask him to pick up the phone (to call a member of Congress), because that is really not necessary. He is circulating all the time with members of Congress,” said Weber, who is supporting Mitt Romney in this year’s race for the Republican presidential nomination.

Former New York Representative Susan Molinari, another Romney supporter, also was hired by Freddie Mac during Delk’s tenure. She did not return phone calls or emails.

Republican Michael Oxley, who was House Financial Services Committee chairman and attended at least 19 Delk fundraisers, said that at the time he did not know Gingrich worked for Freddie Mac.

Oxley “may have seen him from time to time at a social thing,” said Peggy Peterson, a spokeswoman for Oxley.

Gingrich signed a second contract with Freddie Mac in 2006. The lender ended its relationship with outside consultants in 2008, when the U.S. Treasury placed Freddie Mac and Fannie Mae in conservatorship.

Republicans have blamed the government-sponsored lenders, which sustained $14.9 billion in losses when the U.S. housing market crashed, for a major role in the subprime lending crisis.

By: Marilyn Thompson and Samuel Jacobs, Reuters, January 28, 2012

January 29, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

Newt Gingrich: “Deconstructing A Demagogue”

When not holding forth from his favorite table at L’Auberge Chez François, nestled among the manor houses of lobbyist-thick Great Falls, Va., Dr. Newton L. Gingrich likes to lecture people about food stamps and how out-of-touch the elites are with real America.

Gingrich, as he showed in a gasping effort in Thursday night’s debate in Florida, is a demagogue distilled, like a French sauce, to the purest essence of the word’s meaning. He has no shame. He thinks the rules do not apply to him. And he turns questions about his odious personal behavior into mock outrage over the audacity of the questioner.

After inventing, and then perfecting, the modern politics of personal destruction, Gingrich has decided now to bank on the dark fears of the worst element of the Republican base to seize the nomination — using skills refined over four decades.

Monica Almeida/The New York TimesNewt Gingrich spoke at the 1998 Republican National Convention winter meeting in Indian Well, Calif.

Deconstructed, Gingrich is a thing to behold. Let’s go have a look, as my friend the travel guide Rick Steves likes to say:

The Blueprint. Back in 1994, while plotting his takeover of the House, Gingrich circulated a memo on how to use words as a weapon. It was called “Language: A Key Mechanism of Control.” Republicans were advised to use certain words in describing opponents — sick, pathetic, lie, decay, failure, destroy. That was the year, of course, when Gingrich showed there was no floor to his descent into a dignity-free zone, equating Democratic Party values with the drowning of two young children by their mother, Susan Smith, in South Carolina.

Today, if you listen carefully to any Gingrich takedown, you’ll usually hear words from the control memo.

He even used them, as former Assistant Secretary of State Elliott Abrams wrote in National Review Online this week, in going after President Reagan, calling him “pathetically incompetent,” as Abrams reported. And he compared Reagan’s meeting with the Soviet leader Mikhail Gorbachev to “the most dangerous summit for the West since Adolf Hitler met with Neville Chamberlain in 1938 in Munich.”

The Method. Even a third-grader arguing with another kid over the merits of Mike and Ikes versus Skittles knows better than to play the Hitler card. But Gingrich, the historian who never learns, does it time and again. Thus Democrats, he said last year, are trying to impose “a secular, socialist machine as great a threat to America as Nazi Germany.”

He has compared the moderate Muslims trying to erect a mosque and social center near Manhattan’s ground zero to Nazis, and made the same swipe at gays. People who love members of the same sex, he said, were trying to force “a gay and secular fascism” on everyone else.

Deny the Obvious. Gingrich is the rare politician who can dissemble without a hint of physical change, defying Mark Twain’s maxim that man is the only animal that blushes — or needs to. He’s also skilled at attacking the very things he practices. In the South Carolina debate last week, when Gingrich went ballistic over a question on an ex-wife’s claim that he wanted an open marriage, he said he had offered ABC numerous witnesses to rebut the charge. In fact, his campaign admitted this week, there were no such witnesses — only character rebuttals by children from a previous message.

His claim that he was paid at least $1.6 million by the mortgage backer Freddie Mac for work as a “historian” was a laughable fiction. This week, those contracts were released, and show no mention of historian duties; it was old-fashioned influence peddling.

He got caught by Mitt Romney Thursday in a classic political move. After Gingrich blasted Romney for investments that contributed to the housing crisis, Romney turned around and asked him if he had some of those same kinds of investments. Um, yes, Gingrich admitted, he did.

Go for the Hatred. It was Gingrich, even before Donald Trump, who tried to define the president as someone who is not American — “Kenyan, anti-colonial.” And there he was earlier this week, pumped by a big audience in Sarasota, Fla., reflecting back at him these projected fears. When he said he wanted to send President Obama back to Chicago, the crowd took up a chant of “Kenya! Kenya!”

Calling Obama “the best food stamp president ever” is a clear play on racial fears. In the crash of the last year of George W. Bush’s administration, food stamp use surged, but Gingrich would never associate a white Texan president with dependency.

A favorite target is the press. He’s snapped at debate moderators from Maria Bartiromo of CNBC, Chris Wallace of Fox and the preternaturally fair John King of CNN for asking relevant questions. It was a tired and predictable ploy when he tried it on Wolf Blitzer Thursday — he tried to deflect a question on his attacks by calling it a “nonsense question” — and Blitzer didn’t back down. But the outrage is selective and always calculated.

So, Gingrich was the picture of passive redemption when the Christian Broadcasting Network asked him, twice over the last year, about his many wives. In one case, Gingrich said he cheated because he loved his country so much. This week, he said his infidelities made him “more normal than somebody who walks around seeming perfect.” But he never flipped out at the Christian questioner, as he did at King, calling the CNN reporter’s query “close to despicable.” (Another favorite word.)

The general public can read this particular character X-ray, given that Gingrich’s unfavorable rating is off the charts, higher than any other major politician’s. And so could his former Republican colleagues in the House; witness the paucity of endorsements from those who served with him.

But he has a vocal constituency, weaned on the half-truths of conservative media. It makes perfect sense, then, that Gingrich this week demanded that crowds at future debates be allowed to cackle, whoop and whistle at his talk-radio-tested punch lines.

Let’s grant him his wish, and allow audiences to vent at will, as they did Thursday night in Florida. This kind of noise — from Republican debate crowds who have booed an American soldier serving overseas, cheered for the death of the uninsured and hissed at the Golden Rule — are a demagogue’s soundtrack.

 

By: Timothy Egan, The New York Times Opinionator, January 26, 2012

January 27, 2012 Posted by | GOP Presidential Candidates | , , , , , , , , | Leave a comment

“BFF’s”: Mitt Romney And Freddie Mac

To get an edge in advance of Florida’s Republican presidential primary, Mitt Romney has gone after Newt Gingrich this week on his ties to Freddie Mac. At first blush, it’s not a bad move; Gingrich is clearly vulnerable on the subject.

But Romney may not have thought the attacks all the way through.

According to his personal finance disclosure forms, Romney invested pretty heavily in Freddie Mac and made a fair amount of money doing so.

Asked about this on Fox News this morning, Romney was reduced to lying.

BRIAN KILMEADE: Yesterday Newt Gingrich joined us and said, “I just found out that Mitt Romney was in investor in Fannie & Freddie.” What’s the truth?

MITT ROMNEY: [Laughs] That’s pretty funny. My investments, of course, are managed not by me. For the last 10 years they’ve been guided and managed by a trustee, they’re in a blind trust. And the trustee invested in mutual funds and so forth and apparently one of the funds had Fannie Mae or Freddie Mac bonds.

We already know that’s not true. The Boston Globe reported on some of Romney’s finances a few months ago, and specifically noted, “[U]nlike most of Romney’s financial holdings, which are held in a blind trust that is overseen by a trustee and not known to Romney, this particular investment was among those that would have been known to Romney.”

The “blind trust” line isn’t going to cut it.

For that matter, Romney is slamming Gingrich for lobbying on behalf of Freddie Mac, but at the same time, a top Romney campaign surrogate and advisor is also — you guessed it — a former lobbyist for Freddie Mac.

Romney’s campaign really ought to be paying closer attention to these details.

By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, January 25, 2012

January 26, 2012 Posted by | Election 2012, GOP Presidential Candidates | , , , , , | 1 Comment

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