Yesterday, I saw perhaps the best LTE (letter to the editor) I've ever encountered here in Nevada. Steve Davis from Reno wrote this to The Sun:
Mitt Romney’s solution to the housing crisis in Nevada — foreclose on thousands of unlucky families so investors can scoop up real estate bargains that they can rent out — perfectly illustrates the real agenda of Wall Street and the GOP: return us to the two-class landlord system of Dickensian England, where the wealthy, aristocratic lords owned all the land, and the other 99 percent, the working class and peasantry, had to rent from them.
Wake up, America! When the middle class is gone, so is the American dream.
So why couldn't Patrick Coolican get that? Here's some of what he wrote in Friday's Sun.
Hard as it is to hear for Las Vegas residents, Romney might be right, according to real estate experts and economists from across the spectrum.
Preventing the bubble by raising interest rates and enforcing tougher lending standards was the proper policy. Once the bubble inflated, however, it had to deflate and prices had to reach equilibrium before there could be any recovery. [...]
For whatever you think of Romney and his callous message to Nevadans, the lesson here is this: Once you’ve fallen for the scam — be it Tulips in 1630, Pets.com in 1999, or Las Vegas houses in 2005 — you shouldn’t expect to get repaid. The money wasn’t there in the first place.
But here's the thing: Coolican just admitted that the big banks pulled a scam on then new homeowners in the early to mid 2000s. And typically when this kind of crime is committed, victims can at least pursue proper restitution (as well as report to authorities so they can file criminal charges). Now perhaps not all the Las Vegas home buyers of the last decade were completely innocent, but one can't deny that their real or perceived "sins" pale in comparison to what Wall Street did to blow up the housing market. And for all those buyers who jumped in hopes of purchasing their first home and finally joining George W. Bush's "Ownership Society", should they bear the greatest burden of punishment for simply following Bush's advice and doing what our leaders were encouraging?
Teabaggers like to place blame on "Fannie & Freddie" and working poor minorities, but they're wrong. And Mitt Romney's wrong. And I suspect Coolican is going in the wrong direction here. But again, they're missing the real root of this crisis: Wall Street deregulation.
The conservative whipping boy of the 2008 [financial crisis] was Fannie Mae and Freddie Mac.** The GOP did everything in their power to steer focus away from the deregulation of Wall Street banks. They blamed people taking on more risk than they could afford. They didn’t blame the banks for providing the mechanisms to attract people into the market in the first place. Mechanisms like no doc loans, adjustable rate mortgages and no down payment loans were created by the Wall Street banks in order to increase customers into the housing market.
(** Fannie Mae and Freddie Mac are publicly traded companies on Wall Street)
Deregulation made this obtainable and possible. In a free market, banks should be allowed to offer what ever they want in order to attract consumption. The free market also allows mergers and acquisitions, thus creating TOO BIG TO FAIL.
If progressive policies were in place, all these financial mechanisms would be illegal. In fact, if progressive regulations were in place, too big too fail banks would also be illegal making this collapse of 2008 not even part of our history. There was a reason why there weren’t any bank bailouts from the 1940s to 1980s, it was progressive policies that were put in place by FDR and upheld by every administration until Reagan.
The 2008 collapse spurred the Dodd-Frank bill, and while this bill does not address as many problems as I and many other progressives would like, it does address financial mechanisms that attract people into the market that they would otherwise not be in. The Dodd-Frank bill creates a regulation mandating 10-20% down payment on mortgages.
Are underwater homeowners to blame for deregulating Wall Street, allowing banks to create and advertise "No Down Payment! Interest Only! Record Low Rates! Buy Now!" adjustable rate mortgages, then repackage and sell this bad debt as "AAA gold standard mortgage backed securities!"? Are underwater homeowners to blame for the enormous lack of regulatory oversight of the financial sector that reached its horrifying climax in the 2008 economic collapse? So why are underwater homeowners expected by the likes of Mitt Romney to "SUCK IT UP!" when Wall Street "21st century robber barons" are the chief culprits behind this fiasco?
So is that enough to put to rest the inane assertions that Mitt Romney is onto some great idea in wanting more home foreclosures? If not, then let me set aside all notions of altruism (for now) and get down to the economic nitty-gritty: Home foreclosures are a huge economic drag!
No really, they are.
The fact remains that 1 million homeowners are expected to go into foreclosure this year, producing a serious drag on the economy. As Federal Reserve Chairman Ben Bernanke said in a speech today, “the housing sector has been a significant driver of recovery from most recessions in the United States since World War II, but this time — with an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines — the rate of new home construction has remained at less than one-third of its pre-crisis peak.”
If we follow Mitt Romney's advice to "let it run its course and hit the bottom", our economy will be in an even deeper hole that will be even more difficult to escape from. Housing has nearly always been the starting force in turning an economy from recession to recovery. So how do our communities benefit from empty homes? And yes, Romney's "do nothing and let the banks foreclose" policy prescription would lead to even more empty homes if implemented. And this leads to a "domino effect" of depressed home values, scared consumers, fewer home goods purchases, less construction, and fewer jobs. Properly addressing the home foreclosure crisis is not about "re-inflating the bubble", but rather restarting the economy.
I can't believe I'm saying this, but I have to agree with Brian Sandoval on this...
But before you start tweeting everyone you know to declare me an unabashed Sandoval fan, I should note there's a catch. AB 149 is actually Barbara Buckley's brainchild. And while the foreclosure rate here in Nevada is still woefully high, it has come down, and it would be far worse without AB 149 available for homeowners to use to negotiate settlements with the banks and try to avoid foreclosure in the first place.
Without a doubt, expanded mediation programs would be a great start in solving this crisis. Continued mortgage financing reform can also help, albeit reform that avoids further privatization and deregulation in favor of a more balanced system that offers prospective buyers home loans that they can actually afford. And funny enough, Coolican actually mentioned in his article the idea of implementing "right to rent" programs that would allow the foreclosed the option of renting back their homes. Another idea out there involves "rehab and rent" programs that would employ workers in rehabilitating foreclosed properties before selling them in "neighborhood clusters" to investors willing to rent them out as affordable housing. But of course, all of these ideas involve some sort of federal intervention. There's really no way to solve the foreclosure crisis without some sort of government intervention.
Of course, Mitt Romney wouldn't be interested in any real solution to the foreclosure crisis, not when one of his top fundraisers is a lobbyist for the notorious robo-signing foreclosure mill that is Lending Processing Services! For Romney's friends, foreclosure is just too profitable to pass up. And there we have the real reason behind Romney's housing policies. It's always been about his bottom line, not the well being of Nevada or the country. It's callous, it's hurtful, and it's just plain wrong.