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Sunday, October 17, 2010

Foreclosures, real problems and the phantom middle way

The press faith of High Broderism holds that if criticism is coming from "the left" and "the right", then the middle/moderate position must therefore be just the right thing. In practice, what they are willing to consider the middle moves farther and farther to the political right over time.

But what is often missing is the very important party context. The Democrats currently control the Executive and both Houses of the Legislative branches of the federal government. The Republicans are the opposition Party. The purpose of an opposition Party is to oppose. The Democrats were elected in 2008 on a different program than the Republicans. When Republicans oppose Obama and the Democrats from "the right", they are trying to build a new majority consensus for their programs in opposition to the Democratic program.

When criticism comes from "the left" inside the Democratic Party, especially in cases like the public option for health care where the criticism is based on a position popular among the majority of the public and an even larger majority within the Democratic Party itself, that has a whole different political significance for the incumbent President. It's one thing for the President to take stands in opposition to the opposition Party. It's a very different thing to take stands in opposition to a large majority of his own Party and his own base constituency. To our Pod Pundits, that automatically represents "political courage" and bipartisanship, the Holy Grail of High Broderism. Especially if it's a Democrat being bipartisan by supporting Republican positions.

Economist Paul Krugman looks at The Mortgage Morass (New York Times 10/14/2010) and points to some real problems in the current Administration's approach to the economic crisis.

Krugman favors Keynesian economic policies that Democrats could use to both great policy effect and political advantage. The fact that Obama and Harry Reid may not want to hear it doesn't mean that it's not good advice. Outside the Beltway Village bubble where dingy David Broder is considered The Dean Of All The Pundits and bipartisanship is bizarrely worshipped for its own sake (especially Dems being bipartisan by caving to Republicans), the actual content of criticism does matter.

Krugman accurately describes a set of problems whose scope and serious is not being nearly adequately addressed by the Obama Administration's policies at present. The fact that the Republicans' Predator State policies would be far worse doesn't change that fact:

The accounting scandals at Enron and WorldCom dispelled the myth of effective corporate governance. These days, the idea that our banks were well capitalized and supervised sounds like a sick joke. And now the mortgage mess is making nonsense of claims that we have effective contract enforcement — in fact, the question is whether our economy is governed by any kind of rule of law.

The story so far: An epic housing bust and sustained high unemployment have led to an epidemic of default, with millions of homeowners falling behind on mortgage payments. So servicers — the companies that collect payments on behalf of mortgage owners — have been foreclosing on many mortgages, seizing many homes.

But do they actually have the right to seize these homes? Horror stories have been proliferating, like the case of the Florida man whose home was taken even though he had no mortgage. More significantly, certain players have been ignoring the law. Courts have been approving foreclosures without requiring that mortgage servicers produce appropriate documentation; instead, they have relied on affidavits asserting that the papers are in order. And these affidavits were often produced by "robo-signers," or low-level employees who had no idea whether their assertions were true. [my emphasis]

And he spells out the inadequacy of the policy responses coming from the Obama Administration and the opposition Republicans:

True to form, the Obama administration's response has been to oppose any action that might upset the banks, like a temporary moratorium on foreclosures while some of the issues are resolved. Instead, it is asking the banks, very nicely, to behave better and clean up their act. I mean, that's worked so well in the past, right?

The response from the right is, however, even worse. Republicans in Congress are lying low, but conservative commentators like those at The Wall Street Journal's editorial page have come out dismissing the lack of proper documents as a triviality. In effect, they're saying that if a bank says it owns your house, we should just take its word. To me, this evokes the days when noblemen felt free to take whatever they wanted, knowing that peasants had no standing in the courts. But then, I suspect that some people regard those as the good old days. [my emphasis]

Real problems need effective solutions. The mortgage crisis needs a solution that saves ordinary homeowners from fraudulent and unnecessary foreclosures by irresponsible financial institutions - including financial institutions only very recently bailed out by public funds.

Tags: paul krugman, us economy

posted at 2:38:00 PM by Bruce Miller

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