The October surprises are now coming fast and furious as Obama’s lead is slipping in most polls and on Intrade. So empty gestures to boost turnout in his heretofore spurned Democratic party base are the order of the day.
I’m a day behind on this item, but nevertheless thought it was so cynical as to merit special notice. A new effort to rally the troops, per Shahien Nasirpour at the Financial Times, is that the Administration has started messaging to pet activist groups that it will replace Ed DeMacro, the Administration’s favorite scapegoat for its negligence on the housing beat. Team Obama has backed the banks every step of the way, from its failure to use chain of title abuses and obvious tax code (REMIC) violations to pressure banks to do mortgage mods, to its unwillingness to prosecute senior bankers (Charles Ferguson, this blog, and others have set forth legal theories and evidence; the issue clearly is lack of political will), its refusal to undertake anything other than cursory “see no evil” investigations, and its bank friendly measures, from borrower-damaging, “foam the runway” HAMP to a fraud-institutionalizing mortgage “settlement”. But DeMarco, by refusing to endorse principal mods for Fannie and Freddie borrowers (which is a peculiarly short-sighted posture) serves an a convenient distraction for the Administration’s repeated refusal to take any serious pro-borrower measures. From the Financial Times:
But if Mr Obama wins re-election, Mr DeMarco’s days may be numbered, with senior White House officials quietly telling housing industry activists in recent weeks that he will be replaced..
Some borrower advocates have argued that the White House has kept Mr DeMarco in office in part because it provides the administration with an easy excuse when questioned about why they have not done more to prevent millions of home seizures.
But in the past few weeks, Obama administration officials – including Gene Sperling, director of Mr Obama’s national economic council, and Jon Carson, director of the White House’s office of public engagement – have told Democratic groups that they hope to oust Mr DeMarco in the coming months, most likely by replacing him via an appointment while Congress is not in session
DeMarco has been refusing to do authorize having Fannie and Freddie do principal mods for some time. He signaled strong disinclination early in the year and made his position clearly in July. But he’s curiously not given credit for some borrower-friendly ideas, such as a proposal to allow bankruptcy judges in Chapter 13 cases whose house are underwater to pay no interest for five years, which in economic terms is tantamount to a principal reduction, likely on the order of 10%.
So what does this new promise amount to? Well, the Administration could have nominated a FHFA director when it had 60 votes in the Senate but couldn’t be bothered. And even though it’s now winking and nodding about a recess appointment, it could have done one over the Labor Day holiday but didn’t.
I wouldn’t buy a used car from Gene Sperling, nor would I put much stake in a promise made behind closed doors to parties the Administration has treated as unimportant, even if it has now been leaked to the media. That does not mean it might not eventually happen, but stress eventually because:
1. Fannie and Freddie are still huge hot buttons with the right. Any Obama appointee will be seen as looking for a way to find new and creative uses for the GSEs, which is something the Republican love to demonize. That means:
2. Obama is not going to want to rile them until the Grand Bargain is in place. My politically oriented readers think Obama will have a tougher time getting a deal that Romney because Obama actually believes in austerity and will want tax increases, while the Republicans will probably be happy with cosmetics plus cuts to Medicare and Social Security. So there’s greater odds with an Obama win of a pigfight and hitting the fiscal cliff, particularly if Obama’s victory looks particularly weak (as in majority in electoral college but not popular vote, poorer than expected Democratic party Congressional results.
3. As Dave Dayen points out, DeMarco is serving out James Lockhart’s term, which ends in September. So Obama can just measure this out, say putting forward a candidate in April or May, waiting for Senate displays of hostility, and appointing the replacement on the Fourth of July or Labor Day recess. And don’t hold your breath that a new appointee will be such great shakes. Given that the Treasury’s policy has been bank friendly, that the new Treasury secretary is likely to make Geithner look good (you heard it here first), and Obama’s first pick for the FHFA was the particularly limp-wristed Joseph Smith (who is showing his true colors in his role as mortgage settlement monitor by coming up with creative PR moves), an Obama replacement for DeMarco is merely going to be an Administration lackey, not a homeowner advocate.