FORECLOSING THE AMERICAN DREAM
OBAMA PROPOSES KILLING FEDERAL AGENCIES THAT PROVIDE LOW-INTEREST MORTGAGES IN FAVOR OF PRIVATE BANKS.
by Robert Scheer
from HUSTLER Magazine July 2011
The idea that your home is your castle has deep roots in the history of human liberation, and owning your own home, providing an inviolable sanctuary for the family, is a cherished aspect of the American Dream. Your turf, protected by the Constitution from official intrusion, has been key to the notion of a democracy of middleclass stakeholders supported by various government programs going back to the Founders. Not being beholden to the whims of an oppressive landlord, possessing a property deed and buying out the mortgage is a critical enterprise in preserving freedom. That enterprise is now under frontal assault from the Obama Administration.
According to a 31-page policy statement issued in February 2011, the administration is abandoning the government’s time-honored role in helping Americans achieve home ownership by underwriting low-interest mortgages through the government-sponsored agencies Freddie Mac and Fannie Mae. Now President Barack Obama proposes to turn over the entire mortgage industry to the same private banks that sabotaged the American ideal of a nation of stakeholders by “securitizing” our homesteads into poker chips to be gambled away in the Wall Street casino. Instead of punishing those banks, which forced 50 million people into foreclosure or deeply under water on their mortgages, he wants to reward them.
The proposal was originated by Treasury Secretary Timothy Geithner and involves nothing less than a total “winding down” of the nearly 80-year-old federal housing program, setting instead a new goal of a twotiered America in which the masses are content to be mere renters of the American Dream. Such a deal for a country where, as the report concedes, “half of all renters spend more than a third of their income on housing, and a quarter spend more than half.”
This is the same Geithner who during his tenure in the Clinton Treasury Department championed the total deregulation of the then-emerging market in collateralized debt obligations. As a result, people’s home mortgages were sliced and diced into the toxic securities that created what Geithner’s new report calls the greatest economic crisis since the Great Depression. Later, as president of the New York Fed, Geithner cheered on the banks as they went hog-wild, conning folks into buying homes they couldn’t afford and stuffing them into the incomprehensible securities that form the rot at the core of our bankrupt economy.
This is a made-in-the-U.S. nightmare that we inflicted on the world, thanks to an explosion in those toxic securities brought on by the deregulation that most of the Obama economic brain trust supported when they worked for President Bill Clinton and during the ensuing bubble years when they enriched themselves. As the report admits: “The U.S. is…the only high-income country in which securitization plays a major role in housing finance.”
Yet instead of ending that practice, Obama now calls for more of the same: “The administration believes the securitization market should continue to play a key role in housing finance.” Indeed, the plan’s goal of eliminating Fannie Mae and Freddie Mac will dry up the alternative public funding that has provided a source of mortgage support ever since President Franklin Delano Roosevelt launched Fannie Mae to check the power of the banks over mortgages. Now Obama proposes to eliminate that check, leaving would-be homeowners to the tender mercy of the banking giants.
Of course Fannie Mae and Freddie Mac, which had morphed into for-profit enterprises, also bear responsibility for the meltdown. Just as with the Wall Street firms, the massive bonuses paid out to these housing agencies’ top executives were contingent on the value of their stock prices, which in turn were fattened by the sale of those same toxic assets. As the Obama report puts it, “Fannie Mae and Freddie Mac’s profit-maximizing structure undermined their public mission.” What the administration should have proposed is to return the government-sponsored housing agencies to their original function as nonprofit entities supplementing, rather than aping, the practices of greedy bankers.
What Obama neglected to discuss is the demise of President Franklin D. Roosevelt’s grand experiment at the hands of Democratic Party hustlers who turned the agencies away from their “original mission” and into their personal piggy banks while getting Democrats in Congress to approve regulations enabling their greed.
The folks around President Obama know this sad tale well because some of them were principal actors in the housing agencies’ betrayal of the public trust. Just take the case of Tom Donilon, whom Obama recently appointed to the highly sensitive position of National Security Advisor. It was Donilon who was the top legal counsel and lobbyist for Fannie Mae from 1999 to 2005, a period when the agency went off the tracks in backing Countrywide and other private-sector bandits in their irresponsible ripoff scams.
Donilon, who reportedly received $10 million in the three years leading up to the scandal of 2004—when Fannie Mae was fined $400 million for juggling its books to enhance executive bonuses—will never have any trouble financing a home purchase. Not so the tens of millions of Americans who have lost their homes because of Donilon’s reprehensible actions and the many more in the future who will be denied government support in trying to get a place of their own.
Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.