‘They are . . . not interested in asking millionaires and billionaires to pay a half a penny on the dollar for the sake of the future of our children and communities.”
That was the reaction of Sen. Bob Menendez (D., N.J.) upon the defeat Thursday evening of the bill he sponsored that paired an element of President Obama’s jobs plan — funding for the hiring of some first responders and hundreds of thousands of unionized teachers — with a surtax on those earning more than $1 million.
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Yet that same evening, Menendez and his fellow Democrats — as well as self-proclaimed socialist senator Bernie Sanders — voted unanimously to protect subsidies for millionaires’ mortgages. In fact it was another measure Menendez himself sponsored: an amendment to an appropriations bill that will allow Fannie Mae, Freddie Mac, and the Federal Housing Administration to back home loans as large as $729,750. With help from a handful of Republicans, his measure cleared the Senate 60–38.
This “conforming loan limit,” the maximum for mortgages Fannie and Freddie can buy and the Federal Housing Administration can insure, had expired at the end of September and reverted to $625,500. But Menendez proclaimed that Congress must raise the limit back to almost three-quarters of a million dollars in order to save the “middle class.” Not raising the limit “makes it harder for middle class homebuyers to get credit when credit is tight,” Menendez said.
But this definition of middle class is pretty, shall we say, rich. As a Wall Street Journal editorial noted, “the average sales price for existing homes in September was $212,700.” And even in Menendez’s home state of New Jersey, the median sale price of homes was only $303,100 in August, as calculated by Zillow.com, a prominent real-estate website. This amount is less than half of the $729,750 limit Menendez and the other Democrats said was necessary to protect the “middle class.”
If this increased loan limit becomes law, it would mean that purchasers of these expensive homes — millionaires and near-millionaires almost by definition — could save thousands of dollars from below-market interest rates thanks to government guarantees. Yet so far, there have been few if any condemnations of this government privilege for the wealthy from groups involved in the supposedly populist Occupy Wall Street. And this — as well as the movement’s general silence on the government-sponsored enterprises Fannie and Freddie’s outsized role in the financial crisis — exposes the stink of hypocrisy (on top of the many other reported scents) from much of the OWS movement.
Just after Menendez and the ostensibly conservative Johnny Isakson (R., Ga.) introduced the measure last Wednesday, I held out an olive branch to OWS. I wrote on the Corner that since both OWS and the Tea Party claim to despise “corporate welfare and bailouts that benefit the very wealthy . . . both movements should rally strongly” to oppose the Menendez-Isakson amendment.
By and large, Senate Republicans remembered the tea-party message. Only seven joined Isakson in backing the higher limits. Those GOP guys and gals — Isakson, his Georgia colleague Saxby Chambliss, Roy Blunt (Mo.), Scott Brown (Mass.), Lindsey Graham (S.C.), Dean Heller (Nev.), Lisa Murkowski (Alaska), and Olympia Snowe (Maine) — have certainly earned a spot on the Corporate Welfare and Crony Capitalism Wall of Shame. (And Isakson, Chambliss, Brown, Graham, and Snowe already have a spot on the wall from their support of Dodd-Frank’s Durbin Amendment price controls, which benefit big retailers and shift costs to consumers in the form of new bank fees.)
But this group of eight represents less than one-sixth of the GOP caucus of 47 senators. By contrast, all Democrats on the Senate floor voted for these subsidies to the rich. (See vote tally on page S6483 of the congressional record here.) In a February white paper, the Obama administration had commendably recommended letting the loan limit expire so “larger loans for more expensive homes will once again be funded only through the private market.” But the White House apparently made little effort to persuade its own party in the Senate.
What about independent Vermont senator Bernie Sanders, who proudly calls himself a socialist and proclaims his solidarity with Occupy Wall Street? He voted to support these subsidies for those at the top, at the expense of the 99 percent.
"This is despite voluminous new data showing that Fannie and Freddie led, rather than followed, in the creation of reckless mortgages and mortgage instruments. In their new book, Reckless Endangerment, New York Times financial columnist Gretchen Morgenson and market analyst Joshua Rosner write that Fannie 'led both the private and public sectors down a path that led directly to the financial crisis of 2008.'"
Each time an accusation such as the above is lobbed, I am constrained to counter with the report of the Financial Crisis Inquiry Commission, which concluded:
"We conclude that these two entities contributed to the crisis, but were not a primary cause. Importantly, GSE [Fannie and Freddie] mortgage securities essentially maintained their value throughout the crisis and did not contribute to the significant financial firm losses that were central to the financial crisis. The GSEs participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders in the rush for fool’s gold. They purchased the highest rated non-GSE mortgage-backed securities and their participation in this market added helium to the housing balloon, but their purchases never represented a majority of the market."
I am about halfway through Reckless Endangerment. So far, the idea that Fannie and Freddie "led" the creation of subprime lending is nothing more than the idea that Fannie and Freddie initiated Alt-A lending and securitization which weren't all that harmful when done in small-to-moderate amounts, whereupon Wall Street collectively said, "What a great idea! Let's do that ourselves and in spades and with mortgages far more risky because we make fees every time we initiate and securitize mortgages!"
The govt group responsible for alerting us to the Freddie/Fannie mess was essentially ignored when at least part of the govt started to notice a problem. This whitewash is as good as the science community declaring themselves innocent of any shoddy science in the whole AGW debate.
Why every democrat in the Senate agreed to maintain our home loan exposure - for millionaires and billionaires (ha!) - as opposed to allowing just the slightest bit of reduction of said exposure says volumes about the democrats in Washington. They are completely about funneling money to favored constituents, while taking a nice cut off the top for themselves. If I were to look at the core values of each poltical party - and after I got done throwing up - outside of the manipulation of federal dollars for their own re-election, which is business as usual - do the democrats really believe in anythign else? I am struggling to find it.
What your were quoting is acutually the report of just the Financial Crisis Inquiry Commission's majority, who were all Democrats. None of the committee's Republicans signed onto this. And Democrats, as we know from this latest vote, have their own reasons for protecting Fannie and Freddie. In addition, Phil Angelides has long been involved in Community Reinvestment Act loans, and thus he also had a reason to shift blame to a mythical deregulation.
Are you seriously disputing Morgenson's reporting that Fannie was Countrywide's biggest partner? Or the findings of Fannie's former chief credit office Edward Pinto that Fannie labeled many of its mortgages from borrowers with credit scores of less than 660 as prime instead of subprime? Ignoring this data was the only way the commission's Democrats could come to their partisan conclusion that you quote.
I am ignoring nothing. In fact, I commend you to the three "non-Wallison" Republicans in order to view the FCIC report in the proper perspective.
I dispute none of Morgenson's reporting. I dispute her "spin." As I said in my original post, Morgenson's thesis as best as I can tell so far is that Fannie and Freddie caused the crisis by "showing Wall Street how."
From the Republican "non-Wallison" minority report: "As an example, non-credit derivatives did not in any meaningful way cause or
contribute to the financial crisis. Neither the Community Reinvestment Act nor removal
of the Glass-Steagall firewall was a significant cause. The crisis can be explained
without resorting to these factors."
The Republican minority cites ten essential factors; Morgenson, one.
A gov't investigation concluded that massive gov't intervention into a private market and the creation of a publicly backed for profit corporation had nothing to do with the real estate bubble. Why would Congress be duplicitous? Sure, they receive kick backs from the crony capitalist at Fan/Fred, but what does that have to do with anything?
Just look at Canada, the Gov didn't create a market for 30 year fixed rate mortgage products, they don't allow for deduction of mortgage interest and they didn't create crony capitalist market participants. And now they are stuck with a healthy real estate market. The hosers!
Is there a place in housing for the Fed Gov? Sure. Providing guidelines for first time home buyers with limited credit history and then backing loans underwritten on those terms. VA, FHA and Rural Housing loans accomplish that.
Cash out refinances? No.
Second homes? No.
Up to 10 different units? Are you kidding?
Lawdawg, take a look at the FCIC report. Take a look at the six-person majority report. Note that the three-person minority report doesn't dispute the findings as much as it analyzes the crisis a different way. Only one person -- AEI's Peter Wallison, the one whose job truly was truly at stake (ask David Frum) -- issued a one-man "It's all Fannie and Freddie's fault!" dissent.
That's pretty much right, and conservatives do themselves no service trying to overstate the GSE's role, but....
....I think the GSEs made the difference between "serious dot-com-sized correction" and "epic global financial crisis." Markets' irrational exuberance isn't exactly controversial. They boom and then bust. Why, though, was *this* bust so different?
Human nature -- including its tendencies to greed and stupidity -- hasn't changed. (Much -- I think we may in fact be more dishonest and more stupid, thanks to postmodern philosophy and generally crud education.) Government policy, though, can, and has.
Some nitpicking from a math teacher, Mr. Berlau. You wrote, "But this group of eight represents less than one-sixth of the GOP caucus of 47 senators".
Eight out of 47 is more than one-sixth.
Otherwise, great piece.
I know that conservatives try to paint Fannie Mae and Freddie Mac as government schemes, but they were both private corporations. It is amazing how often conservatives try to pin the blame on Democrats for their lousy ideas. Like the requirement of Obamacare that everyone must purchase health insurance....an idea put forth by Republicans.
Are the Democrats hypocrits? Absolutely, without a doubt, 100% true. This is why the occupation movement is doing so well. It has zero loyalty to the Democrats or the Republicans, both of whom are a big part of the problem.
You can't have corruption without a corrupt government and those who would corrupt it. The movement attempts to address this, which is why it is so broad-based. Otherwise it would be nothing more than the left-wing version of the Tea Party, which is the media narrative, but far enough from the truth that anyone looking into what the movement is about can figure it out pretty quickly.
Pass the parcel Mike B but the chickens have come home to roost. Just front running for the O's new mortgage refinance scheme? The FCIC was another whitewash. Hey I hear the big bad bus is on the road.
You're treating OWS as some kind of monolith controlled by a single entity. I live in New York, and I've been down there plenty of times. These people have no idea about some technical detail in a Fannie and Freddie bill. In fact, I had no idea before I read this article. By saying they're hypocrites, you're assuming they know and approve of this stuff. Not so much.
Occupiers are a varied breed. Almost none of them are violent, and indeed the NYPD that surround them are a good deal more violent and harmful to average New Yorkers than they are. A good many of the protesters actually have libertarian leanings (although I guess they're more to the Left of things, in their sympathy for unions and whatnot). This article is absolutely ridiculous, and National Review is resorting to what William F. Buckley called "intellectual sloth on the Right" by publishing it.
Here is the thought process: "Left is bad! Occupy Wall Street is Left. Occupy is bad! Publish articles critical of it, no matter how absurd or inaccurate!"
Does NR really only want to be a right wing version of the Daily Kos?
To all conservatives living in NYC: I urge you to come down to this movement and see it for yourself. You won't like most of the signs, but the protesters don't bite. Yes, they're protesting corporate greed while using their iPhones, just like Tea Party people drive on government built roads to get to their anti-government spending protests. That's not quite hypocrisy.
I hope OWS keeps going strong, the more they get exposed the more people think they are kind of silly or worse. To the extent one of our major political parties wants to cozy on up to them, all the better.
If NR wants to point out some of OWS's "inconsistencies" for point of argument that's fine. That you weren't aware of the reality of Freddie and Fannie speaks volumes about why our free press is nothing more than a democrat mouthpiece and should alarm you way more than a NR article that in your own words at a minimum demonstrates our fearless OWS protesters don't know the "technical details" about that which they are protesting. It isn't that technical of a detail. They are mis-informed as a group if I am being polite. A significant portion of them are worse.
I was aware of Fannie and Freddie's role in the crisis. I wasn't aware of this $650,000 vs. $767,000 thing. And why on Earth should I be? Ever hear of rational ignorance? External Link
To the extent that OWS protests corporatism, that's all fine and dandy. The problem is obviously with those in the movement who advocate ever greater statism.
That said, the Republican Party has done a really horrible job when it comes to cleaning up crony capitalism. God awful. Just as bad as the Democrats, if not worse.
Corporate welfare is even worse than social welfare.
And I wish that OWS would start realizing that political/corporate/union cronyism (in general, the left has unions, the right has corporations) is 99% of the problem. The government is deciding who wins and who loses financially so small businesses or anyone else up against someone who is connected politically doesn't stand a chance. If you want to win in the wealth game, get yourself a lobbyist and start contributing to Politicians. That's the problem. Heck, if OWS moved to protest political cronyism, you'd probably have half the Tea Party join in the protests. Now THAT would be something to behold.
I went and saw it for myself. If I wanted to get with the marchers, I would not be able to find a place where I was more than five feet from some wacko "smash the state" commie hawking Workers' Daily World or wearing a Che shirt.
It's nice that these people are helping OWS to keep going, but I am a big fan of American capitalism, well regulated, and am well aware that communism is flat-out awful.
OWS may not be a monolith. But I have yet to see any criticism from any of its members of Fannie, Freddie or the Left's role in the crisis. If you can point to an example, I'll give them kudos.
The hypocrisy accusation was mostly leveled against the Democrats who voted for higher Fannie-Freddie loan limits, subsidizing mortgages for McMansions. My message to OWS was to to get educated about Fannie and Freddie's role in the crisis.
If you're raling against the system, you do have an obligation to know somewhat how the system works.
I was in New York and went to Zuccotti Park last week. But all I saw was anti-capitalism and 99 percent signs. But ironically, the food vendors that surrounded them were shining examples of capitalism. Even though they are probably much poorer than the protesters, they know what the American Dream is all about. They're the ones policy makers should take heed of.
Now the "jobs bill" is being peddled under the cause of "first responders and hundreds of thousands of unionized teachers." The leftists in our government really want to tax the fat-cats more. They just have to find a rationalization to justify it.
They're like the Puritans. The historian Macaulay said, "The puritan hated bear baiting, not because it gave pain to the bear, but because it gave pleasure to the spectators." The liberals hate tax cuts, not because they cause problems for government budgets, but because they give relief to the tax-paying citizens. They HATE to see people spending their own money.
