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Kavoussi writes: "'You could have the biggest stimulus program in America by getting rid of one person,' Van Jones, president and co-founder of the progressive group Rebuild the Dream and former White House adviser, said Thursday. 'He is single-handedly holding up tens of thousands of jobs.'"

Van Jones said on Thursday that firing Ed DeMarco (above) would be 'the biggest stimulus program in America.' (photo: Getty Images)
Van Jones said on Thursday that firing Ed DeMarco (above) would be 'the biggest stimulus program in America.' (photo: Getty Images)



Van Jones: Firing Ed DeMarco Would Stimulate Economy

By Bonnie Kavoussi, Reader Supported News

11 August 12

 

band of progressive leaders joined the mounting calls to fire America's housing policy chief Ed DeMarco Thursday.

"You could have the biggest stimulus program in America by getting rid of one person," Van Jones, president and co-founder of the progressive group Rebuild the Dream and former White House adviser, said Thursday. "He is single-handedly holding up tens of thousands of jobs."

"This is the only issue that I can remember that Timothy Geithner and Paul Krugman both agree on," Jones added.

Jones joined Michael Brune, executive director of the Sierra Club, and Leo W. Gerard, international president of United Steelworkers, on a conference call Thursday to encourage President Barack Obama to fire DeMarco, who is acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. DeMarco, a Bush administration appointee, has opposed offering a form of loan forgiveness, known as principal reduction, on mortgages held or guaranteed by Fannie Mae and Freddie Mac. The government-backed housing giants have a hand in about half of all outstanding mortgages.

DeMarco has argued on many occasions - including in a recent, threatening notice to local governments that are considering using eminent domain to perform principal reductions - that allowing this type of loan forgiveness would increase the risk of "moral hazard." DeMarco's argument is essentially that helping underwater homeowners might encourage others to default strategically in order to get help, too. DeMarco most recently rebuffed the White House's call for principal reductions in late July.

The administration has data to support the strategy. Studies have found that widescale principal reductions would save money for the government and help create tens of thousands of jobs. More than one in five borrowers are underwater on their mortgages, owing more on their home than the home is worth.

Jones said that principal reductions by Fannie Mae and Freddie Mac would enable a stronger economic recovery by giving underwater homeowners the financial freedom to buy refrigerators and sofas, remodel their homes and more. The boost in spending would pump money into the economy and create jobs, they said.

"The ability of people to write down their mortgages so that they reflect their current value would free up billions of dollars of worker opportunities to do something other than give banks money that who the hell knows goes where," Gerard said. "This is an economic opportunity to have money injected into the economy that otherwise is going to financial institutions that quite frankly don't need it."

Gerard said that principal reductions would even help banks, because homeowners who aren't underwater are less likely to walk away from their mortgages, and those continued mortgage payments would benefit the banks, reduce blight and prevent deterioration of home values.

Five major banks have already agreed to offer at least $10 billion in principal reductions to underwater homeowners as a part of the national mortgage settlement earlier this year. But some banks have been slow to pursue principal reductions so as to have time to repair their balance sheets, experts say.

Jones acknowledged that it may not be politically palatable to forgive the mortgages of homeowners whom some may view as undeserving. But the banks are to blame for the housing mess, Jones argued, and therefore should be forced to take on the risk to fix it.

"Some of these big banks ... are the ones who are not following the rules, and they're being rewarded for bad behavior," Jones said. "If we put a trillion dollars on the table to help the banks stabilize, this would be pennies to help families stabilize, and they're going to have a much more positive impact on the economy."

Jones speculated that Obama has not fired DeMarco yet because "there has been this misperception" that he could not. But Jones said that now it is "pretty clear" that Obama can replace DeMarco with another acting director through a recess appointment. Numerous news outlets have reached the same conclusion.

The FHFA did not immediately return requests for comment. A senior Obama administration official noted in an email that congressional Republicans blocked the president's nomination of Joseph A. Smith, then North Carolina's banking commissioner, to replace DeMarco without justification several months ago and that the administration supports principal reductions when appropriate.

 

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+13 # Street Level 2012-08-11 10:23
Loan forgiveness would cause "moral hazard?", really?, encouraging others to default to get help?
These idiots are so elevated by stolen wealth that their feet no longer touch the ground.
 
 
0 # RLF 2012-08-13 04:42
I can see forced changes in loan terms because the banks have not allowed it to happen at all, but I don't like 'forgiveness'. I would certainly stop making payments if suddenly my neighbors were getting lower home prices and principals...ot herwise I'd be throwing money away. The rich do whatever is needed to make money and I'd do the same. I don't think principal is the problem...it is wages are too low and should be regulated. Put a mandatory ratio on ceo to lowest worker pay and then we will see ceos working to get everyones wages up...because we know how greedy they are! (And include stock options and benefits at market value not cost.)
 
 
+9 # DPM 2012-08-11 13:12
We need to follow Iceland's lead.
 
 
+10 # Buddha 2012-08-11 14:55
What about the implicit moral hazard of allowing our big banks to continue to gamble on their leveraged proprietary trading backed by our FDIC insured checking and savings deposits? Don't see him calling for reinstitution of Glass-Steagall, do you? BHO, I gotta say, this is the consequence of filling your cabinet with a lot of guys that were in charge under W or working on Wall St when they imploded the global banking system with their Fail bets. One of my biggest disappointments from Obama...but what else should I have expected from a Centrist who masquerades once in a while as a Progressive.
 
 
+1 # Jorge 2012-08-12 20:30
Hmmmm, I wonder what Goldman-Sachs thinks of "Principal Reduction". Obama would need to check with Goldman as that giant has been a huge contributor/inf luence on his actions (not words).
 
 
+2 # Eldon J. Bloedorn 2012-08-11 16:23
The Justice Department just released banks from fraud and those who prepetrated the fraud, the sale of subprime mortgages, from criminal prosecution. Fines were paid. ......."with liberty and justice for all." A crock of "something." "American exceptionalism" as Romney, Bush, Cheney would say. True, it is exceptional(ism ) that the crooks do not go to jail. Hello Canada, here I come.
 
 
+7 # Doubter 2012-08-11 17:37
The "little people" might be 'spoiled' by mortgage relief, not like the banksters, who by their very nature are the creme de la creme and worthy of the highest regard and consideration. (Damn the rest of us!)

I take this to be the governments rationale for saving the banksters and ignoring the real victims.
 
 
+1 # John Steinsvold 2012-08-12 19:49
An Alternative to Capitalism (if the people knew about it, they would demand it)

Several decades ago, Margaret Thatcher claimed: "There is no alternative".
She was referring to capitalism. Today, this negative attitude still persists.

I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to an essay titled: "Home of the Brave?" which was published by the Athenaeum Library of Philosophy:

http://evans-experientialism.freewebspace.com/steinsvold.htm

John Steinsvold

“Insanity is doing the same thing over and over and expecting a different result."~ Albert Einstein
 

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