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Latest Obama Headfake: Threat to Replace Favorite Housing Scapegoat, FHFA’s Ed DeMarco

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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.

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33 comments

  1. Conscience of a Conservative

    DeMarco has been a breath of fresh air, he does what he says, and he comes from conviction. Big change from the Old days of how Fannie Mae used to operate.

    By the way…it did not go un-noticed that the new gov’t action on behalf of Fannie Mae against BAC alleging that the CLUES program was tweaked with checks and balances removed and bad loans source to Fannie. This is rediculous. CLUES was all about automated computer driven underwriting meant to go hand in hand with Fannie Mae Desk Top Underwriter. Back in 1995 Countrywide was Fannie’s first customer and I suspect it was more of a partnership meant to enrich both Mozillo , Mudd & Raines. Even back then it meant ending the traditional know the customer, know the loan process of underwriting a mortgage. You had to know even back then what was being dreamed up.

    1. Leviathan

      The conversation about DeMarco and Obama’s cynical “rediscovery” of the foreclosure crisis (“that still going on?”) quickly got sidetracked. I’d like to know if anyone wants to answer a very simple question: Is it simply too damn late to “save” the distressed homeowners? I mean, talk about Dawn of the Living Dead. With home prices (maybe, in places) staging a Frankenstein-like revival, what responsible FHFA head would offer mass write-downs now? Keeping people in place will be a hard sell when young families want to buy houses but can’t find any. We’ll call it Ghost inventory in honor of Halloween. DeMarco may retire but his replacement will be even less inclined to do anything constructive, because at this point there is precious little that would work.

  2. Middle Seaman

    Obama is not slipping. According to the serious predictions of Sam Wang and Drew Linzer Obama has at least a 9 to 1 chance of winning. Wang has predicted with 100% precision both the 2004 and 2008 electoral votes. Unless the sky falls, the 2012 elections are for intent and purposes over.

    We do have a huge problem coming up. It’s Obama and belief in the cat food committee.

    1. Yves Smith Post author

      You’re not up on the latest polls. His margin is slipping, and incredibly, he’s looking close in what is now a swing state, Nevada. I agree he’s still likely to win, but I see lots of evidence in the Dem hackocracy of increased nervousness.

      And people are misreading the Gallup poll that shows Romney as ahead. Gallup is a very reliable pollster, and that poll is an expensive one, of LIKELY voters, as opposed to registered voters. Obama has a huge problem with disillusionment in his base, and that may not be adequately captured in other polls.

      1. Conscience of a Conservative

        I find it difficult to believe anyone at this point in time is changing their opinion on who to vote for in the upcoming election, so when I read polls are changing, I must question how the polls are being conducted. Who are these people who keep changing their minds.

        I too think the most likely outcome is an Obama win in November, but the risk in my view is not in voters changing their mind, but in the voter base not turning out for their candidate which is what can turn an election, and why I believe Obama went aggressive in debates two & three and why he’s engaging in rhetoric and action that caters to it.
        He can’t afford for his supporters to stay home(really they were never going to vote Republican)

  3. Greg

    I’m not an american, so I’m not a voter, but please don’t start the same bullshit “oh we want to be even handed so we’ll talk about all the flaws in the sane candidate” shit, which results in short sighted idiots voting for the guy that isn’t being argued about, and then the world gets a munter for president.

    Maybe just go with “lets elect the guy thats least likely to bomb another country on a whim”.

    Please.

    Then you can go back to your “OMFG how exceptional are americans” shtick, and noone needs to get hurt. Cause hurting people to prove american exceptionalism? That’s tired.

      1. Greg

        So a mistake can only be made once? There was an election three and a half years ago, so anything that was at risk then can’t possibly be at risk again?

        Face it, almost every presidential election for the last thirty plus years has carried the risk of a nutjob pushing the big red button to get his jollies.

        1. Greg

          Nah fuck it, nevermind, this isn’t a way to converse that will get anywhere. We’ll get by. Do what you will.

          1. Leviathan

            Nuclear weapons are so 80s, Greg. Drones are the new black, and Obama loves, loves, loves those targeted hits from the sky. His little secret Star Chamber gets to pick the list, there is no oversight, and the Dem base can’t seem to understand what a global threat this poses. As a non-American, Greg, you should really rethink your position. Romney will get a lot closer scrutiny from Congress and NGOs than Obama gets, which makes it more likely that the world will get a more responsible drone policy under his helm. And drones are the future, Greg. Get with the program.

        2. ifthethunderdontgetya™³²®©

          The point would be that the U.S. killing machine has continued under Obama.

          The Bush-Cheney assaults on civil liberties in the name of “War On Terror” have continued under Obama.

          And the only reason this election is even close is because Obama spent the last 3 1/2 years protecting and enriching the banksters, rather than the voters who put him in office.

          I agree with Yves that Obama is still likely to win. Yay, huh?

          And then 4 years later, when he’s finished destroying the Democratic brand (a process begun by Bill Clinton), we’ll get a President Santorum or some such in 2016.

          All because the corrupt cynics who run the Democratic party have guessed (correctly) that they can get away with screwing their base over and over, because “lesser evil”.

          Vote Farmer! Dog Is Scary.
          ~

  4. ifthethunderdontgetya™³²®©

    So empty gestures to boost turnout in his heretofore spurned Democratic party base are the order of the day.

    I know this really fired me up.

    (Reuters) – President Barack Obama says he’s confident that if re-elected he will secure within six months a deficit-reduction deal with Republicans equivalent to the “grand bargain” he failed to achieve last year.

    / sarcasm tag
    ~

    1. wbgonne

      IMO, Obama and the neoliberals who run the Democratic Party are attempting to once and for all purge Progressivism from the Democratic Party. The sneering disdain, the insults, the mocking are all designed to demonstrate that the Democratic Party can win without Progressives. Should Obama win re-election, we can expect a sharp move Right from Obama and the Democratic Establishment. The intriguing question is what happens to those Progressives who remain within the Democratic Party, especially as the confounding influence of first black president wanes. The “fierce urgency of now” means that the neolibs want to inflict as much damage and pain as possible before they can’t hide behind Obama anymore. The neolibs probably hope that, by the time Obama fades, they will have an immovable stranglehold on the Party. They may well be correct.

  5. wbgonne

    “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.”

    I disagree. Obama will have a far easier time gutting the social safety net than Romney. Obama gives the rest of the Democratic politicians cover and he neuters the Democratic partisans.

    Agree wholly re: the breathtaking cynicism that is Obama. He is a black-hearted monster.

    1. diptherio

      No, he’s not a monster, just a human like the rest of us. However, he is a politician, which means he has increased amounts of narcissism and egotism as compared to your average Joe/Jane, a much greater desire (one might even say lust) for power, and very few scruples as regards what means are acceptable for attaining that end. But that just makes him a d-bag, albeit a big one, not a monster.

      I actually think the more monstrous phenomenon is how naive most people are about these basic facts of life. We all seem to suffer from a strange sort of cognitive dissonance, where on the one hand we all know that pretty much ALL politicians are full of BS, and yet we still expect them to actually fix things and work in the interests of the country. Despite the fact that everyone knows that most every politician is lying most every time s/he opens her/his mouth, every pronouncement of every political leader is discussed, first in the MSM and then on main street, as though it were the simple truth.

      I’ve been hearing since I was just a little tike that politicians are lying, two-faced, SOBs, and what I’ve seen since has only reinforced that belief. We could make a lot of progress in this country if we would just start assuming that anything any political leader says is a lie, if not bald-faced then at least a lie by omission or implication. Instead, we continually frame our political debates as though what the politicians are telling us are legitimate reflections of reality, and framing our own thinking in terms that have been laid out by people that EVERYONE agrees cannot be trusted, i.e. the pols.

      1. wbgonne

        Lying is a character defect. Lying to accomplish evil goals that hurt and kill people makes one evil. Achieving those evil goals makes one a monster. QED.

        1. Valissa

          In general, as children we were taught to tell the truth and we were told we were “bad” when we didn’t. We were also taught to be fair and to share. And when we didn’t do those things, we were told we were “bad.” When, as children, we did what we were told and followed the rules of our parents, community, school, church, etc, then we were praised for being good.

          But just like there comes a time when a child discovers there is no Santa Claus, there comes a time when one grows up and realizes the world isn’t a fair place, and that lots of peopel don’t tell the truth for all kinds of reasons (some good, some bad, some neutral).

          Children can also have irrational fears about monsters, which their parents do their best to convince aren’t here. What is a monster then, but a personified fear or judgement?

          1. Valissa

            Children dream of getting a pony and they fear monsters. It’s another dualism in action. btw, all political propaganda is designed to feed conscious and unconscious hopes and fears, it is all designed to accentuate emotional response and the way the brain works, the more emotional one gets the less rational it gets. Naturally some level emotion is very helpful for guiding the reasoning self to take action, and it’s not possible to turn off one’s emotions anyway and I’m not suggesting that. But getting all caught up on how “bad”, how “evil” and how “monstrous” leaders are to the extent that a complex reality is lost is a big problem in the collective, IMO.

          2. Waking Up

            Valissa, just curious…Is that what you would tell the children in Pakistan, Afghanistan, and other countries whose friends and family died from drone missiles directly as a result of President Obama’s “kill list”… that they have “irrational fears”?

      2. Valissa

        Wholeheartedly agree! So why do so many people continue to take the politicians at their word? Possibly because it is much easier and more fun to criticize their words when they are taken as “real.” Criticizing/complaining is a fun past time for political junkies. This goes along with the Manichean good vs evil game which is also very easy to play and also a fun pasttime for partisan political junkies.IThe junkies love their lambasting. What I find surprising in how many intelligent people are so intellectually lazy as to continue the same old boring whining D vs. R, L vs R arguments. Real change happens, IMO, when people start to think differently and talk about situations differently. Not seeing as much of that on this blog as I’d like. The political posts here are, for the most part, very much stuck in the traditional frames.

      3. Eureka Springs

        Because starving as many of the 75 million Iranians to death, while denying them medicines and destroying the value of their currency based on lies about their nuke capability or intent is not monstrous at all. never mind, Yemen, Libya, Syria, Palestine, Afghanistan, Pakistan, Honduras to name a few.

        Never mind denying tens of million of Americans health care. Maintaining the largest prison industrial complex in the world. Setting up Disposition Matrix which includes American citizens… and so on.

        The abrogation of rule of law on far too many matters to try and list.

        The looting and lies on nearly every economic metric which matters to at least 90 percent of US.

        No no… not a monster at all.

        And how is that working out for you… just accepting your salient point they all lie? There happen to be several candidates on the ballot who are not lying… or at the very least lying in orders of magnitude below the two monster candidates.

        1. wbgonne

          Yes, I really don’t get the sanguinity from wringing hands and mumbling, well, they’re all liars, what are ya gonna do.

          Obama is a very powerful person doing very evil things. He is a monster. Let’s call him President Frackenstein.

          1. Valissa

            “they’re all liars, what are ya gonna do”

            That’s simply another dualism. Acknowledging that they are liars does not automatically imply acceptance of that nor submission to it. The point I’m trying to make, and maybe I’m wasting my time with this, is that in order to figure out how to start solving a problem or making a change it’s important to clearly and in shades-of-grey detail ascertain what is happening and why. This takes some deeper digging, some studying of history and human nature. Then once the underlying trends and reasons for these “monstrous” behaviors are delineated then one can get a better handle on where to start implementing some change.

            You can’t solve a problem until you understand it, and making strong emotional statements based on simplifications of reality is not conducive to understanding. Of course I understand why epople are so upset about the current system, but emotional reactions alone won’t solve anything.

    2. Yves Smith Post author

      Ahem, please reread statement.

      Obama really wants to cut the deficit, while Romney will be happy with “reforming” Social Security and Medicare and cosmetics.

      Really cutting the deficit is hard. Obama wants tax increases.

      This is why it won’t be as easy for Obama as he and others think. Oh, there will be a deal, but with a lot more drama with Obama, and more of a fight.

      1. wbgonne

        “Obama wants tax increases.”

        Obama wantED a tax increase last time because that’s what made it politically palatable. The Tea Party said no (thank god) and that was that. If Obama wins again he won’t give a damn about political palatability. He will give the GOP ANYTHING in order to achieve his goal of slashing the social safety net. I see no evidence that raising anyone’s taxes is high on Obama’s priority list. Were that so, he could easily have let the Bush tax increases expire when he had the leverage. Instead, Obama has pointed a gun at his head with the auto-cuts and will say you better stop me before I pull the trigger. Melodramatically, a deal will be reached and the social safety net will be slashed and Obama will achieve his dream of becoming the Black Reagan. Good luck to Romney getting the Dems to roll over like dead dogs the way they will for Obama.

      2. Brooklin Bridge

        [...]while Romney will be happy with “reforming” Social Security and Medicare and cosmetics.

        Assuming that is true, the real question is; would the thin pretense of opposition between the parties in the Senate be enough to block Romney from harming the safety net? With Obama, we are f**ked. That’s a given. But would gridlock be enough of any real or significant deterrent with Romney?

  6. Susan the other

    DeMarco is protecting the taxpayer at this late date? The GSEs are such peculiar corporations. It would be nice to have someone go point by point from the beginning of the housing ponzi mess to now. I vaguely only know that the GSEs were totally private corporations, like the TBTFs, which got lots of government largesse second hand thru the banks and had the advantage of government guarantees, which in turn allowed them to both write up and buy up toxic mortgages which they bundled and sold fraudulently to mostly pension funds all the while making huge salaries and bonuses for their executives. Then in 2007 the racket ended. The government took them over in 2009 but didn’t know what to do with them and still doesn’t. Bill Black says prosecute the former executives. The Administration is pretending like the GSEs can tell the country what to do. Nobody is claiming to have the proper control over them yet. What exactly are the GSEs now? Are they still bundling and selling non securitized securities? Which the Fed is quietly buying up every month. So what good will it do to agree to some nickel and dime mods if the GSEs don’t own those MBS any more or if the ones they do own are going to be bought back by the banks and then sold by the banks to the Fed? The Fed will soon own them all, right? What is the Fed going to do with them – that’s the question. There is no relief in sight for homeowners or pension funds. Nobody in government even cares.

    1. Bud

      Susan, the sad news is that virtually every American institution is now corrupt to the core. You don’t fix that. You replace it. That’s still far in the future.

      Meanwhile the banksters are firmly in charge and will continue to bleed the citizenry by usery until the day of reckoning finally comes. Then it will be pitchforks and torches — and best observed from afar.

      1. different clue

        Pitchforks and torches are useless against LRAD eardrum rupturizers and Raytheon OvenRays. Unhappy people will have to think of something better than pitchforks and torches.

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