Broke(back) Barney
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Would it be queer to vote for the man who created the housing bubble and hence buggered the U.S. economy?
Wall Street pirates were not responsible for the recent American melt-down. Anyone with the diligence to dig discovers that what ruptured economic stability were Fannie Mae and Freddie Mac, which started life as government agencies under FDR (the previous dictatorial democrat doofus in the White House). Initially tasked with keeping people in their homes, Fannie and Freddie in latter years were congressionally encouraged to remove the risk banks faced in financing homes for people whose credit stunk so badly that no otherwise sane banker would lend them a dime. Mac and Mae managed this magic by becoming the secondary market for mortgages, buying-up as much weak paper as possible at the prodding of certain congress critters. These entities begged banks and loan originators to proffer poor loans that Mac and Mae could suck up.
Before it all erupted, Fannie and Freddie held or backed half of all American mortgages and a full 20% of their portfolio was subprime.
These reckless but not feckless financiers had help. A lot of help. Congress allowed them to leverage their assets more highly than any bank (Freddie was in hock for $70 for every $1 in cash it held – banks run at about 30:1 – and some think Mae and Mac’s numbers are low due to the mortgage-back securities for which they were on the hook). For a few years before they collapsed and were bailed-out by taxpayers (you), economists, Wall Street watchers and even some common folks were raising alarms. Yet during this time certain members of congress got Freddie to pucker-up and continue encouraging the production of bad loans by buying them up en masse.
No wonder they went down flaming.
The dude dangling incentives in front of Freddie’s face was none other than Barney Frank, a congressman facing ejection this election from his “safe” Massachusetts seat. You know, “safe” like the one Scott Brown took. Much of reason Barney may soon be bending over for his constituents is that they are painfully aware that their current states of unemployment, foreclosure and suicidal thoughts are due foremost to Mr. Frank.
That and the 215,000,000,000 bail-out bucks Fannie and Freddie get (that’s $215B boys).
Congressmen may quibble over a quarter trillion dollars, but to Massachusetts voters wasting such huge sums money is a pain in the butt. When this news broke in Boston and bordering burgs, people wanted to know what scoundrel was responsible for over-leveraging their children’s future. Seems all roads led back to Barney, whose rhetorical back door gapes wide open. Five years before Freddie and Fannie’s fall, Franks (as a member and chairman of the House Committee on Financial Services, the imbeciles who oversee banking and lending) responded to growing concerns of their state by saying of “serious financial losses to the Treasury … I do not see.” Four years before you lost your 401K, Barney bellowed “I would like to get Fannie and Freddie more deeply into helping low-income housing,” despite Wall Street warnings of how a collapse of the two mortgage giants would ripple throughout the world economy. He continued in this way, all the while engineering legislation that gave Mac and Mae special tax breaks and funding groups like ACORN who pressured banks at the local level to lend to poor people with poor credit.
Barney poked Freddie fiercely. It came to a dirty climax and we all feel used.
Now he is in a somewhat tight race with Sean Bielat (yes, I asked ‘who?’ as well). Though leading by 12 points, we see two interesting developments facing the 30-year career politician. First 12% of the voting public is undecided, which in a district dominated by Democrats is atypical. For so many to not be standing behind Barney is bizarre. Could it be Brown again?
More intriguing though is Franks’ faltering over time. In 2002 Barney grabbed 77% of the vote. Then in the last election cycle he pulled a mere 64% of voters out of his arse. This year he is, at best, yanking 49%. Barney’s lead is large but not insurmountable given the huge number of undecided voters. Though he will likely slide through this snug hole in voter patience, unelection is not impossible.
He may get by on a lisp of a prayer.
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lets not forget that clinton started the housing mess. On November 3, 1994, President Clinton sent a letter from the White House to Secretary Cisneros at HUD. It stated:
“Dear Henry:”
“Homeownership is the American Dream. Our nation has embraced this dream since the National Housing Act of 1949 made ‘a decent home and a suitable living environment for every American family’ a goal of national policy. The United States is the first major industrial country to make homeownership a reality for a majority of its people. Thanks to effective cooperation between industry and government, the doors of homeownership have been opened to millions of families in the past 45 years. However, since 1980, the national homeownership rate has been declining. Reversing this trend is vital to American families, to communities, and to our economy. Homeownership strengthens families and stabilizes communities. It encourages savings and investment and promotes economic and civic responsibility. Expansion of homeownership is an integral part of the Administration’s economic plan. It spurs new investment, strengthening the economy and creating jobs. A stronger economy in turn enables more people to buy homes. For all these reasons, it is in our national interest to expand homeownership opportunities for all Americans.”
“Today, I am requesting that you lead an effort to dramatically increase homeownership in our nation over the next six years. I would like you to work with the Assistant to the President for Economic Policy, the Assistant to the President for Domestic Policy, the Secretary of Agriculture, the Secretary of Veterans Affairs, and other private and public sector partners you may designate to develop a National Homeownership Strategy that will carry us into the 21st century. I request that you report back to me within six months, with a concrete strategy involving the private and public sectors, and all levels of government, that builds on the base of the more than 1.5 million additional families who have been able to buy their own homes since the beginning of this Administration. Your program should include strategies to ensure that families currently underrepresented among homeowners – particularly minority families, young families, and low-income families – can partake of the American Dream.”
“In the course of developing this strategy, you should explore ways to combine private and public sector resources and commitment to:
* Cut Costs, including financing, production, and transaction costs and fees, to make homeownership more affordable and financing more accessible;
* Open Markets, to increase choice and remove discriminatory and regulatory barriers, making homes, financing, and insurance more accessible and affordable to all Americans, and;
* Expand Opportunities, to make homeownership a reality for more people through education, information, technology, and community involvement.”
“Previous cooperation between the private sector and the federal government has opened the doors to homeownership to tens of millions of American families, and has been one of America’s greatest success stories. This new initiative to dramatically expand homeownership by the end of this century is in keeping with our nation’s bipartisan tradition of public-private partnership in this arena. I welcome your commitment and involvement in this important task. I know that working together, we can make the dream of homeownership a reality for millions more families and build a better future for all Americans.”
“Sincerely, Bill Clinton”
At the same time, President Clinton made a major speech in Anaheim, California to the annual convention of the National Association of Realtors, announcing the new initiative. Eight months later, in a ceremony at the White House in the East Room, he unveiled his National Homeownership Strategy with 100 key actions to implement the three broad elements of the strategy – Cutting Costs, Opening Markets, and Expanding Opportunities – with the key implementing group being a public-private partnership called the National Partners in Homeownership, representing every major national association involved in housing policy, from the major industry groups to state and local governments to non-profit housing advocacy and community-based development organizations. Representatives from the 65 public, private, and civic sector members of the National Partners in Homeownership were present at the White House for President Clinton’s announcement on June 5, 1995. Over the next five and one-half years, more than 250 state and local homeownership partnerships were formed and received official designation from the National Partners in Homeownership, and these state and local partnerships were absolutely essential for implementing the National Homeownership Strategy. Today these partnerships represent an important mobilization of grassroots constituencies and a well-developed communications network and organizational infrastructure for implementing a progressive housing policy agenda.
Three days earlier President Clinton had proclaimed June 5, 1995 as National Homeownership Day, providing the first major national policy and political recognition of this potent issue since the Great Society era in the 1960s. The text of the Proclamation read as follows:
“Throughout the more than 200 years since our nation was founded, Americans have embraced the dream of homeownership. Strengthening families, establishing communities, and fostering prosperity, homeownership is the cornerstone between government and industry, the doors of homeownership have been opened to millions of Americans. And the United States is the one of the first countries in the world to make homeownership a reality for a majority of its people.”
“For the better part of this century, America has made homeownership a priority of national policy. The National Housing Act of 1934 created the Federal Housing Administration’s home mortgage insurance program, empowering more than 23 million Americans to buy their own homes. In 1944, the GI Bill of Rights set up the Veterans Administration’s home loan guaranty program, enabling millions of veterans to start a new life for themselves and their families. The Housing Act of 1949 declared that every American family should enjoy a ‘decent home and a suitable living environment’ – an ideal that has been reaffirmed in myriad ways since then.”
“Our country’s longstanding commitment to this goal is a testament to the tremendous rewards of homeownership. Homeownership spurs the production and sales of goods and services, generating new jobs and brightening America’s economic horizon. It encourages savings and investment, promotes economic and civic responsibility, and enhances the financial security of the American people. Perhaps most importantly, homeownership gives Americans pride in their neighborhoods and hope for a brighter tomorrow.”
“Now, therefore, I, William J. Clinton, President of the United States of America, by virtue of the authority vested in me by the Constitution and laws of the United States, do hereby proclaim June 5, 1995 as “National Homeownership Day.” I urge all of our citizens to observe this day with appropriate programs, ceremonies, and activities that celebrate the great American Dream.”
Starting with one event at the White House on one day involving less than 100 guests, within two years the week of June 5th had become “National Homeownership Week” by Presidential Proclamation. Since then, every year during National Homeownership Week in America there are literally thousands of events nationwide involving hundreds of thousands of people, all gathering to raise awareness about homeownership opportunities, and to celebrate this important issue for families, communities, economic prosperity, and quality of life.
Simply put, President Clinton’s National Homeownership Strategy was an enormous, unqualified success. It exceeded all conceivable expectations as a public policy initiative. While there was considerable trepidation in 1994 and 1995 among senior White House staff that the goal of breaking the 1980 record and achieving a new all-time high national homeownership rate by the year 2000 would not be reached, in fact, the record was broken in 1997, again, in 1998, again in 1999, again in 2000, and again in 2001. The national homeownership rate jumped from 64.1 percent in 1992 to 68.1 percent in 2002. This four percentage point increase in 10 years equaled the four percentage point increase in 20 years from 1960 to 1980, when the population base was much smaller, enabling percentage changes to occur more rapidly. In all, the National Homeownership Strategy helped generate more than eight million new homeowners in American, and most importantly, the percentage increases among African-American households, Hispanic households, women-headed households, low- and moderate-income households, young households, and urban households, all were greater than the increase in the overall national rate. For example, according to the report of the Millennial Housing Commission, “Between 1994 and 2000, the number of lower-income homeowners increased by about 2.5 million, African-American owners by about 1.2 million, and Hispanic owners by about 1.2 million.”
There are several reasons why the National Homeownership Strategy proved to be such a successful national policy initiative. One key reason is that we did not rely on trying to pass major new legislation or massive budget increases. The wisdom of this approach was confirmed when the Republicans gained control of the Congress in 1995. If our initiative had depended primarily on vigorous Congressional action, we would have been deeply disappointed. Instead, we relied on a massive, nationwide public-private partnership that involved 100 major actions being carried out by thousands of entities. Such an approach made possible a decentralized but huge mobilization of resources in support of all aspects of this multi-faceted and comprehensive strategy. We also benefited from the overall effectiveness of President Clinton’s economic policies, with eight consecutive years of economic growth, rising incomes and wealth, historically low interest rates including home mortgage interest rates, 23 million new jobs created, and significant increases in employment, incomes, and a sense of optimism among the targeted groups – minorities, women, young adults, people with lower incomes, and people living in cities and inner ring suburbs.
However, the most important reason for the success of the National Homeownership Strategy has to do with the underlying political philosophy and public policy perspective, which is based on a true “win-win” approach. In other words, homeownership in America is what I call an “Additive Value.” This means that people believe they are better off not only if they own their own home, but they believe they are better off if other people own their homes as well. An Additive Value says, essentially, “if you win, I win; and if I win, you win.” It is the complete opposite of most of what passes for public policy in American, which is much more along the lines of a “zero sum” approach: “if you win, then I lose, and vice versa.” At a time when Americans were and still are openly hostile to spending the necessary funds to ensure that everyone has decent quality affordable rental housing, they are willing to actively support and promote homeownership. That is because they believe that people can only become homeowners if they have a job, work hard, earn and save their money, which unfortunately, they do not believe is the case for subsidized renters. Even if they are mistaken about renters, the perception is still there guiding their political and policy preferences. Since they also believe that homeowners are better and more active citizens, better community residents and neighbors, stronger contributors to their own economic well-being through ownership of a major financial asset that can and normally does rise in financial value, and stronger contributors to overall economic well-being by promoting investment, savings, production, and employment, U.S. voters want to share their American Dream of opportunity through homeownership with their fellow citizens.
In the Clinton Administration and particularly at HUD, we built on the concept of homeownership as an Additive Value to develop our one great success in national housing policy. Even at a time when “affordable housing” and “urban development” were dirty words in Washington, when the Republicans wanted to abolish HUD and Secretary Cisneros wanted to change our name to the Department of Homes and Communities, when one journalist called the HUD Secretary “the Secretary of Urban Poverty” and when all of our efforts at fair housing were highly controversial, we were able to get broad-base support for the National Homeownership Strategy. We said we wanted to achieve all-time high homeownership for everyone: rich and poor, white and black and brown and yellow, young and old, urban and suburban and rural, singles and couples and families with children, detached houses and townhomes and condominiums. Then we said that in order to generate eight million new homeowners, it would be necessary to concentrate on raising the rate of the groups that are farthest behind, because they have the most ground to make up and that is where the big numbers are. For example, according to the Millennial Housing Commission, “As of 1999, the gap between black and white homeownership rates stood at 27.2 percentage points, the gap between Hispanic and white homeownership rates at 28.6, and the gap between lower-income and high-income rates at 32.3 percentage points. A slim majority of lower-income households owns homes.”
What is remarkable about the National Homeownership Strategy and the National Partners in Homeownership is that we were able to obtain strong bipartisan and mass public support for doing what normally we could not do politically, which is to target resources, programs, and policies toward disadvantaged groups. We openly talked about and publicized our efforts to increase homeownership among racial and ethnic minorities, women, lower income people, young adults, and urban residents, and were applauded for our commitment, rather than being reviled for such a bias as HUD normally has been during has been in recent times. Indeed, at one of our first meetings of the National Partners in Homeownership, no less a conservative Republican stalwart than Federal Reserve Chairman Alan Greenspan proudly proclaimed the success of anti-discriminatory fair lending laws and even spoke favorably of affirmative policies such as the Community Reinvestment Act, all in the name of opening up home mortgage financing opportunities to minorities in order to increase their rates of homeownership. Similarly, even though the Republicans, led by Senator (and 1996 GOP Presidential candidate) Robert Dole, worked tirelessly to abolish HUD in 1995-6, aggressively attacking nearly every HUD program, they remained steadfastly silent about the National Homeownership Strategy, never once criticizing it and risking incurring the wrath of their supporters among the National Association of Realtors, National Association of Home Builders, Mortgage Bankers Association of America, America’s Community Bankers, and similar groups, all of whom were enthusiastic supporters of President Clinton’s National Homeownership Strategy and founding members of the National Partners in Homeownership.
Conclusion: HOusing Policy for the 21st Century
It should now be clear to Democratic Party policymakers and political strategists, and to progressive activists in general, that the most effective means of promoting affordable housing during the next few years is to focus on expanding and maintaining affordable homeownership, both to increase opportunities for renters to become new homeowners, and to assist existing troubled homeowners during this current economic downturn, especially people of lower incomes, to sustain their homeownership over the long term. Such a strategy presents the only real opportunities for bipartisanship, since the Bush Administration and the Congressional Republicans are openly supportive of programs that promote homeownership opportunities among minorities and lower income families. Currently the nation’s homeownership rate has begun to drop in 2003 after 10 years of steady advances, causing some concern within the Bush Administration about a potential return to the declining homeownership days of Reagan and Bush from 1981 through 1992. This could open the door for a strong and popular issue to be vigorously raised by the Democrats in Congress and among the 2004 Presidential candidates.
Indeed, several of the most concrete recommendations of the Millennial Housing Commission directly related to both expanding resources and improving policies for affordable homeownership. Without delving into all of the detailed minutiae of their report and other recommendations, let me emphasize that affordable homeownership policies and programs can unite all of the disparate housing constituencies, and even the National Low Income Housing Coalition has developed a proposal for creating a national housing trust fund using Federal Housing Administration (FHA) insurance surpluses, some of which would be used for increasing affordable homeownership opportunities for lower income households. I particularly recommend that Homeownership Zones, which was an effective10-city demonstration program funded by HUD during the Clinton Administration, become a large-scale nationwide program with fully authorized by Congress with substantial budget appropriations. Homeownership Zones is the best way to strengthen urban neighborhoods, drawing in new investment and population, attracting stores and services, and improving schools and safety.
A renewed focus on increasing homeownership affordability for lower income will by no means solve the enormous crisis of insufficient public and private resources devoted to building, preserving, and subsidizing decent quality affordable housing for low-income renters, or related problems of lack of support for public housing construction, homeless assistance, and numerous other special housing needs, any more than it did so during the Clinton Administration. However, for now, it is certainly the best and in fact the only real hope of building a consensus for more energetic and widespread action to improve housing conditions and opportunities for Americans during first decade of the 21st century.
housing mess