President Obama can declare immunity for hundreds of thousands of illegal aliens and can also unilaterally order the broad refinancing of mortgages on millions of “underwater” homeowners in order to reduce principal payments and debt, The New York Times’ Paul Krugman told the liberal “Take Back the American Dream” conference on Tuesday.
One of the benefits of such a move, Krugman said, would be some additional economic activity at a time when the economy is sluggish. But another benefit is clearly political and could provide the votes Obama needs to be re-elected.
Speakers at a subsequent “Taking on Wall Street” panel agreed with Krugman’s approach and went further, declaring that “underwater homeowners” constitute a “huge powerful voting bloc” that could help re-elect Obama in November.
“That will bring voters to the polls,” Richard Eskow of the Campaign for America’s Future said of the proposals for Obama to extend debt forgiveness or principal reduction to millions of people.
The term “underwater” technically refers to owing more on a home than it is worth. Many of these homeowners, estimated at 15 million or more, might not qualify for refinancing because their current income doesn’t meet the lending criteria, or because they haven’t paid enough on the principal.
Krugman’s remarks came during a discussion moderated by Chris Hayes of MSNBC that was devoted to the topic, “End This Depression Now!” In addition to the debt ploy, Krugman expressed the hope that Federal Reserve Chairman Ben Bernanke would do something to stimulate economic activity over the next few months.
A big theme of the conference was that Obama’s recent grant of amnesty to an estimated one million illegal aliens was because of pressure from progressive activists and that Obama will use his presidential power to act on mortgage debt relief or forgiveness if liberals take to the streets.
New liberal groups are emerging on a regular basis to provide Obama with the political cover for taking this unprecedented and extraordinary action. The Home Defenders League has been formed to fight foreclosures and evictions and publicize the campaign. Another, the New Bottom Line, is run by veteran Soros operative Tracy Van Slyke.
Although Obama has initiated various proposals to allow some homeowners to refinance their mortgages at lower interest rates, the progressives want him to go much further and facilitate refinancing and principal reduction on a broad basis through Fannie Mae and Freddie Mac, which own or guarantee more than half of U.S. mortgages.
On the “Taking on Wall Street” panel, Richard Eskow calculated the political benefits of Obama taking action. He said that if the underwater households are the same size as the American average, the average number of people living in them is 2.6. That’s more than 40 million people, he noted. Furthermore, if one assumes there are 1.5 voters per household, that’s 24 million potential voters, he said. They are “a powerful new political and economic force,” he says.
However, Edward DeMarco, director of the Federal Housing Finance Agency and the federal regulator for Fannie Mae and Freddie Mac, is standing in the way of the proposal to mandate large-scale principal reduction.
“Fire him,” Krugman told the progressive activists, to loud applause.
Progressives regard DeMarco as a “Bush Administration holdover” and want Obama to replace him with a recess appointment. Katrina vanden Heuvel of The Nation magazine, one of the stars at this conference, has accused him of singlehandedly blocking America’s economic recovery. The Congressional Progressive Caucus held a press conference attacking him with “underwater homeowners” from various states critical to Obama’s re-election effort.
In fact, as even the liberal Washington Post has noted, DeMarco is an economist and career civil servant who served 10 years, “most of it under President Bill Clinton, as the Treasury Department’s top Fannie and Freddie analyst.” The paper points out that he is “operating under a statutory mandate that requires him both to maximize assistance to troubled homeowners and to minimize taxpayer costs.”
DeMarco argues that large-scale debt forgiveness would expose Fannie and Freddie, which have already received $190 billion in taxpayer bailouts, to further losses. He points out that such an approach would create an incentive for some of the current borrowers who are paying their mortgages to cease paying in search of debt forgiveness.
Equally important, he said in a speech at the liberal Brookings Institution that debt forgiveness would be unfair to the millions of homeowners who have sacrificed to pay their mortgages.
“Clearly, many households got over-extended financially,” he said. “Some accumulated debts they couldn’t afford when hours or wages were cut or jobs were lost. Others withdrew equity from their homes as house prices soared. Others bought houses at the peak of the market, often with little money down, perhaps in the belief house prices would continue to climb.”
“Yet there are other Americans who did not do these things,” he continued. “There are families that did not move up to that larger house because they weren’t comfortable taking the risk. Perhaps they had to save for college or retirement, and did not want to invest that much in housing. And there are people working multiple jobs, or cutting back on the family budget in many ways, to continue making their mortgage payments through these tough times. Many of these families are themselves underwater on their mortgage, even though they may have made a sizeable down payment.”
Commenting on DeMarco’s remarks, the Post said that he “clearly sees himself as speaking for this silent majority, and he deserves to be heard.”
But concern about the taxpayers or the homeowners who are paying their mortgages was not in evidence at the progressive conference, which is searching for a new class of victims/voters to function as a constituency for Obama’s re-election effort. These activists also want a scapegoat, in addition to Wall Street and the banks, and DeMarco is it.
But the progressive elites demonstrated that they are extremely selective when it comes to bashing Wall Street and the wealthy.
I attempted to ask activist Tracy Van Slyke why, in her remarks at the “Taking on Wall Street” panel, she never criticized Obama fundraiser Jon Corzine’s mismanagement of MF Global, resulting in more than $1 billion of missing funds, or the activities of George Soros, whose off-shore hedge fund has been linked to the housing market collapse. She declined comment and walked away.
Soros has funded the Campaign for America’s Future, which sponsored the conference, as well as the Media Consortium, previously run by Van Slyke, and scores of other progressive groups.
New York’s Democratic Attorney General Eric Schneiderman was also mum when I asked him after the panel discussion whether he was probing Corzine’s missing money. He stared at me in disbelief, as if he didn’t expect any questions about the financial misdeeds of the former Democratic senator and governor, and Obama economic adviser.
Cliff Kincaid is the Director of the AIM Center for Investigative Journalism, and can be contacted at [email protected].