Friday, August 3, 2012

DeMarco is in deep

I've written on several occasions about Ed DeMarco, the director for the agency that oversees Fannie Mae and Freddie Mac, and how is policies have been detrimental to the US economic recovery. In his most recent piece for the Times, Paul Krugman takes DeMarco to task as well for his refusal to allow homeowners to refinance their mortgages to get a lower interest rate, thereby saving them from bankruptcy and foreclosure.

Krugman points out two things that are very interesting. First, that the plan to allow homeowners to refinance in order to stimulate the economy and balance the housing market has bipartisan support. However, Republicans have blocked Obama from appointing someone to replace DeMarco, who is adamant that he will block this from happening. So, while Republicans support a refinancing program for homeowners, they seem to be actively disrupting it from being done, which may indicate more of their political obstruction for the sake of denying Obama a "win" on the economy. The second interesting point is that DeMarco's resistance to refinancing is really beyond the scope of his job description. DeMarco is not supposed to use his position to set national policy, merely observe the operations of Fannie and Freddie to prevent waste, fraud, and abuse. What DeMarco is doing is overreaching in his role as a regulator, and using his leverage over the organizations to push their policy in a direction he wants. It should be enough to have him removed from his position but, as I've stated before, there are some roadblocks being thrown up to prevent that.

It's a little disheartening to me that one man can throw his influence around to the extent that he can disrupt the economic recovery of an entire nation. Mortgage refinancing, rate adjustments, etc. are considered some of the most valuable tools used by the lending agencies to help people stay in their homes. DeMarco's own agency has produced studies and data that show there would be increased economic activity, a slowdown in foreclosures, and more revenue generated because people would be able to pay off their bills rather than going deeper into debt and defaulting. It makes sense, and it's a policy that both parties supposedly agree on. So how is it that such a plan can be disrupted by one person?

Hopefully, DeMarco will be targeted by the Obama administration for a recess appointment. That may make some waves within the Republican party, but they are the ones that are not letting Obama replace the man, so they really should have no complaint on that score. It is especially scandalous if they truly support the plan to relieve the burdens on homeowners, as Krugman asserts, because it would mean they are standing on both sides of the issue, and are leaning towards the side that will cause harm to the American People.

I know some people like to argue that those who took sub-prime mortgages, bad loans, or risky investments when it came to purchasing a home are to blame. They should have known better, they should have read the fine print. But here's the thing. You can't expect everyone to "know better" or this wouldn't have happened. And when you have professional economists who don't understand what happened, how can you expect the average American to? But the larger issue with blaming the consumer on this issue is that it glosses over the fact that these are American citizens who were the victims of fraudulent and negligent financial practice. We don't blame murder, assault, rape, or robbery victims for being victims of crimes. Why are we hearing people blame homeowners for getting mortgages that turned out to be money traps? To me, it makes little sense. But still, DeMarco and others continue to claim that people need to learn from their mistakes, need to fall down in order to get back up, need to go into default, bankruptcy, lose their homes, and lose their financial future on principle. Let's start moving towards a system that helps the victims rather than re victimizing them.

1 comment:

samp said...

I agree on replacement for DeMarco. Just a note. I have for more than 40 years never missed a mortgage payment. Yet, under the present rule for refinancing I can am not allowed to refinance our home. It's extremely frustrating to sit here paying faithfully month after month, year after year, and not be able to take advantage of the lower interest rates. Yet we sit here watch those who can not now or ever afford a mortgage get all the government help they can cram into there "dependent" lifestyle. Those who work hard, are successful and pay their debts faithfully are at a distinct disadvantage in this everyone-dependent-on-the-government approach now taking place in this country. You'll understand and maybe even sympathize a little more when you've tried to get a mortgage and get turned down because you are successful. Shame on those who penalize successful, hard working Americans. We know who I'm talking about. Enough said.