May 2016
In January 2008, when Senator Obama was running for the
Democratic nomination for president he
shocked many Democrats when he
went out of his way to praise President Ronald Reagan. It was impossible at the time to know what he meant,
but it now seems clear that he was signaling his intention to govern not as a
reformist Democrat, but as someone who would oversee the world on fire --- a
world where Donald Trump can seriously vie for the presidency.
The way in which he sabotaged his own mortgage relief
program – HAMP (Home Affordable Modification Program) – ensuring that in most
cases no relief would be forthcoming -- stands
as a model of his retrograde and
intentionally destructive agenda.
A follow-up article will outline a theory explaining his
motivation.
***
Obama Inherits 15 Million Underwater Homeowners
At the heart of the Great Recession of 2008 were the
millions of underwater homeowners -- those whose mortgage debt had risen more
than 20 percent higher than the value of their homes. At the peak of the 2008 crisis, there were 15
million underwater homeowners. By
late 2015, their numbers had dropped, according to various estimates, to as low
as 4
million – or as high as 7.4
million..
That the numbers had fallen from their highs were no thanks
to the Bush administration which was nearing the end of its term -- nor did
their Republican party remit do more than barely feign interest in such
matters.
‘What about the incoming Obama administration? Supporters of
the new president might have expected that helping distressed homeowners would be
a priority since a goodly number were surely among his core constituency. Not
to mention assisting more than 10
million families would provide a crucial
boost to the economy and would immeasurably strengthened his party and burnish
his national appeal. Yet, apart from lip service and misleading press releases,
the Obama administration turned out to have just as little interest as had its
predecessor in assisting Main Street.
Indeed, looking back, we can now see that, just like his predecessor,
his agenda, when he entered office was to block aid to homeowners, despite its negative
effects on the economy.
.
Two books that emerged in 2012 which trace the Obama administration’s refusal to assist middle and lower class homeowners are Neil Barofsky’s Bailout: An Inside Account of How Washington Abandoned Main Street
While Rescuing Wall Street; and
Sheila Bair’s Bull By the Horns:
Fighting to Save Main Street from Wall
Street and Wall Street from Itself . Both books are insider accounts
attesting to the authors’ struggles against the Treasury Department run by
Timothy Geithner.
Indeed, it turns out that Geithner was basically following
White House orders. Neither books come right out and nailing President Obama as
chiefly responsible for setting US policy, but there can be little doubt that
Geithner acted throughout with the complete backing – and understanding of the
White House. By 2012 and certainly by
the time I read the Barofsky and Bair books in 2014 and 2015, I was clear that
President-elect Obama chose Geithner because he understood that the former head
of the New York Federal Reserve (and tax dodger) favored Wall Street over Main
Street on principle and would act accordingly. It was evident that Obama chose Tim Geithner to be his point man
blocking reform.
In the
spring of 2012 I had
blogged on
the homeowner crisis issue when evidence emerged that, as he began his third
year of office, President Obama was
again breaking his promises. A New York Daily
News op ed revealed the administration’s
treachery. The two authors of the op-ed,
Mike Gecan and Arnie Graf, had hoped that at long last, the president was
indeed serious about “speeding assistance to homeowners.” That many were
still suffering there was no question.
Gecan and Graf reported that in 2012 there were 12 million
homeowners who were collectively $700 billion underwater. The writers were
exercised when they found that the administration’s newly formed “Residential “Residential Mortgage-Backed
Securities Working Group” was a sham even though it was to be co-chaired by
high profile New York Attorney General Eric Schneiderman.
They cited the experience of a hopeful Schneiderman who twice travelled to
Washington to take up his duties with the mortgage fraud Working Group. There he found that there was no sign of
an office, no phones or phone number, and no staff. According to their op-ed, this newly formed group was
the sixth such group that the White House had created and the total number of staff hired for the
previous five groups, “according to a
surprised Schneiderman,” was one!
By 2013
White House’s opposition to supporting Main Street was so widely understood
that half a dozen states attorney’s general for a time refused to sign off on
the administration’s clearly insufficient plan to stem mortgage fraud. They
couldn’t support a program whereby the government
offered merely $25 billion which was merely !0% of what homeowners who were victims
of “predatory banking practices”
required.
***
A little hint from Barofsky?
President George W. Bush had appointed Neil Barofsky
Inspector General to monitor the $700 billion bank bailout program called TARP
– the Troubled Asset Relief Program.
Barofsky’s oversight position was created as a concession to Congress
which had hoped to ensure that at least a portion of the bailout funds would go
to struggling homeowners. A Democrat, Barofsky, was chosen for the post of SIGTARP –Special
Inspector General of TARP -- largely
because Congress hoped to put in place a
man who would stand up to powerful banking interests. He had been serving with
distinction for the past eight years as Assistant District Attorney for the
Southern District of N.Y.
Barofsky recounts an incident from early in Obama’s
presidency that had dismayed and confused me and later made me reconsider what
I took to be the new president’s priorities.
In February 2009, President Obama spoke at the Dobson High
School gymnasium in Mesa, Arizona to announce a $50 billion mortgage
modification program. Arizona was an appropriate
venue for Obama’s presentation, reeling, as it was, from an avalanche of
foreclosures,. Barofsky points to some of the statistics: Nationally there were
“2.3 million properties receiving foreclosure fillings and more than
900,000 bank repossessions in 2008 alone.”
Unemployment had shot up 2% in
the previous six months.
Behind the scenes, even while many were heartened by Obama’s
speech, Barofsky and his team were concerned -- as well as was Sheila Bair for
slightly different reasons (see below).Especially worrying was that Treasury
hadn’t given SIGTARP any details about the program even while it was announced
that the plan guidelines would be issued in two weeks. Barofsky felt it was too
short a time “put together a well thought out program.” Barofsky’s office was
in the loop because SIGTARP was created to oversee government expenditures on
these programs and to insure a clean, fraud-free disbursement of funds.
(Barofsky 124-127)
The day after the president’s mid February announcement in
Arizona, Barofsky was working with his colleagues in his Washington office with
the TV in the background when they heard some shouting. They looked up at the
TV monitor and saw
Rick Santelli, a CNBC anchor, in midrant against the new TARP
mortgage modification program. He described it as a plan for
"losers" and compared it to Castro's Cuba. At one
point, he turned to the roaring traders on the floor of the Chicago Mercantile
Exchange and asked, "How many of you people want to pay for your
neighbor's mortgage that has an extra bathroom and can't pay their bills? Raise
their hands.” Finally, in a phrase that would change the landscape of
conservative politics in the country, "We're thinking of having a Chicago
tea party in July.”…
…
Santelli’s rant , and the political movement it inspired,
hung over the [SIGTARP] program for the rest of my time in Washington. (p. 127)
In February 2009 I wondered if Rick Santelli was to have the
last word -- if his rant would be sufficient to kill U.S. action to help
underwater homeowners. Barofsky’s
narrative helped remind me that Santelli’s rant came just a day after
the president’s announcement and suggested an otherwise outlandish conspiracy
theory – defined as any theory not sanctioned by the authorities and their
media messengers. I wondered if the Obama
administration may have had a hand in engineering Santelli’s high profile
public relations attack on his own mortgage modification program -- perhaps via
a leak from someone in Geithner’s Treasury Department,
I wondered how Santelli could know in advance that President
Obama’s program would allow “losers” to mooch on government largess? Barofsky
writes that the details of the program, “the nuts and bolts of how the program
would work” were not yet in place, and so could not yet be public
information. President Obama, in his
remarks in Arizona, had emphasized that his plan would focus on “rescuing
families who've played by the rules and acted responsibly.” The
president was careful to emphasize that his plan
will not rescue
the unscrupulous or irresponsible by throwing good taxpayer money after bad
loans. It will not help … speculators who took risky bets on a rising
market and bought homes not to live in but to sell. It will not help
dishonest lenders who acted irresponsibly, distorting the facts and dismissing
the fine print at the expense of buyers who didn't know better. And it
will not reward folks who bought homes they knew from the beginning they would
never be able to afford. So I just want to make this clear: This
plan will not save every home. (my emphasis)
While Santelli might have simply ignored Obama’s cautious guidelines
and rushed to judgment about the way “losers” and speculators might get their
hands on taxpayer funds, how could he know –without a heads up – that his
remarks would not face a strong White House inspired rebuttal from sympathetic spokespeople
inside and outside government?
Santelli’s reference to the Tea Party later made me wonder if the White
House and Treasury actually welcomed and encouraged Tea Party and Republican
opposition.
The White House rebuttal never happened. By not engaging in
strong pushback, the White House was effectively green-lighting the upcoming
Tea Party campaign and Republican and grass roots opposition.
***
Shelia Bair
Widely perceived as an effective reformist and an opponent
of banks that were “too big to fail,” Sheila Bair served as Chairperson of the
Federal Deposit Insurance Corporation from 2006 to 2011 -- two years into
Obama’s term. Bair also found Timothy
Geithner to be her bête noire, forcing her to work around the obstacles he
often put up, as she did her best to work for the public interest. Well before
the end of her term it was clear that she would not be reappointed by the Obama
administration.
Cheating homeowners, not helping
As it happened, Sheila Bair was at the president’s side in
Arizona when he announced his home modification program. Bair
cringed when the president announced that he aimed to help three to four million
homeowners. She was vexed because
she understood that Obama was announcing figures he should have known (or
surely knew) were inflated. Her own, more aggressive, program –turned down by
Treasury -- would at most help about 1.2 million homeowners. History proved her right when three years
later, by the time she wrote her book, fewer than 900,000 homeowners were
making lower modified payments.
Worse than merely inflated claims, an adverse effect of the
White House’s inadequate program, was that about a million homeowners were cruelly thrown into foreclosure by the program even
though they had been making timely modified payments for months. These homeowners
had signed up for “trial modifications” -- an administration idea to quickly
announce high numbers – but were later informed that they had not filed all the
extensive documentation required. Thus
more homeowners suffered than were helped as the unlucky ones were duped into
premature or unnecessary foreclosures. .
Geithner’s motive vs Obama’s
Geithner’s motive for blocking aid to Main Street is
comprehensible, though reprehensible. He seems to have viewed his area of
responsibility as a zero sum game: i.e., his policies reflect the view that
help for Main Street conflicts with the interests of big banking and Wall
Street. What’s clear is that Tim Geithner should have been among the last
people tapped by a Democratic president to administer programs so critical to
the middle class and others. Nor is it accidental
that regimes such as Bush’s and Obama’s should especially target the middle
class since they are the ones with the wherewithal and the interest in
challenging injustice and inequity.
The question remains: Why did Obama choose someone like
Geithner who represented the interests of the 1%, or perhaps more accurately
the .001% Why didn’t Obama
take seriously his mandate to serve the national interest?
What was Obama’s motivation?
Why would he deliberately sabotage his own constituency, his own
reputation and that of his party, not to mention the health of the US economy
and the resulting international ramifications? Why did he pursue a malevolent
agenda? Why did he become the more effective evil, institutionalizing
retrograde and destructive policies? Why
did he act in a way that would make him so unpopular and so weaken his party?
Why would he deliberately give up the opportunity to gain public acclaim and
enhance his legacy?
One thing we can construe from the Barofsky and Bair
narratives is that they portray an Obama administration that has not been
passive. Barack Obama has not been conflict averse, nor disengaged. The
president’s destructive and obstructive record instead bespeaks an aggressive,
focused, determined mind, equally as ruthless and relentless as the people he
placed in powerful positions.
Obama’s appointments to senior and mid-level positions
all-too-often represent the president’s counterintuitive agenda. Geithner was
not alone in subverting the policies that Obama’s supporters hoped to see.
There were and are too many others -- often Republicans -- who continue to
serve as Obama's point men and women, pursuing policies antithetical to the
hope and change the country and the world so sorely needed. Some of their names
are Eric Holder, Larry Summers, Robert Gates, James Comey, David Petraeus, John
Brennan, Michael Hayden, Hillary Clinton – and more..
Barack Obama is, or ought to be, known by the company he
keeps.
The End
