Economy -- 'Too Little, Too Late' Subprime Solution

December 10, 2007

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, and Ali Frick

ECONOMY

'Too Little, Too Late' Subprime Solution

On Thursday, President Bush stood with Secretary of the Treasury Henry Paulson and Secretary of Housing and Urban Development Alphonso Jackson to announce an agreement with the mortgage industry to provide relief to families facing home foreclosures. "The holidays are fast approaching and, unfortunately, this will be a time of anxiety for Americans worried about their mortgages and their homes. There's no perfect solution, but the homeowners deserve our help," Bush said. His plan would freeze mortgage rates for some troubled borrowers. Yet the vast majority of Americans facing foreclosure would be left out by the Bush plan, including the record 351,000 people who fell into foreclosure in the third quarter of this year. The deal asks for only a voluntary freeze on interest rates, and does not require congressional approval or funds. The effects of the subprime mortgage crisis have spread throughout other sectors of the economy, an estimated 800,000 Americans have are already faced foreclosure since mid-2007, and 3.5 million loans are expected to default before the end of 2010. Although Bush's plan will offer substantial help to thousands of families, it is, as The New York Times editorial board described it, "too little, too late and too voluntary." Andrew Jakabovics of the Center for American Progress said, "As with other serious crises that have happened on Bush's watch, the solution is to make it the next administration's problem."

SMALL HELP FOR THOUSANDS: After months of ignoring the mortgage crisis, Bush's acknowledgment of the problem is certainly a step in the right direction. For those who qualify -- an estimated 250,000 borrowers -- Bush's plan would give them a five-year freeze on their adjustable loan rates. "Bush will also ask Congress to temporarily expand the authority of states and localities to issue tax-exempt mortgage-revenue bonds to help people refinance their mortgages." Further, those borrowers who do not qualify for a rate freeze can still receive help from mortgage counselors, who can walk them through the process of refinancing and help them stay on top of their payments. Secretary Paulson described the HOPE NOW program as "a coalition of mortgage servicers, counselors and investors that are working to avoid preventable foreclosures and to improve the functioning of the mortgage markets." Paulson said that 50 percent of foreclosures occur "without borrowers ever talking with a mortgage counselor." The HOPE NOW program, which will use a national letter campaign as well as other publicity efforts to reach homeowners, will thus provide needed assistance and advice to millions of Americans unsure of how to cope with rising interest rates. Additionally, some homeowners may be able to refinance into private, fixed-rate mortgages, or use Federal Housing Administration loans.

TOO MANY EXCLUDED: Bush's plan is hardly the comprehensive assistance millions of Americans need. Sen. Chris Dodd (D-CT), chairman of the Senate Banking Committee, called the plan "little more than financial wallpaper" that was "insufficient to say the least." The plan "would exclude those who are delinquent on their payments -- about 22 percent of all subprime borrowers, according to First American LoanPerformance, an industry research firm." Moreover, Bush's plan would apply only to those facing rising rates in 2008 and 2009, although "$57 billion in subprime loans were scheduled to be reset at higher rates in the final three months of this year." Also, "in one curious twist, the plan could eliminate many people who have good credit scores or who managed to improve their credit scores, because the good ratings would be a sign they did not need help." Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, said, "We've all told people, don't go any more deeply into debt. Now we're saying that people who go more deeply into debt will have an advantage over people who don't go more deeply into debt." Finally, some economists worry that the plan may discourage purchasers of mortgages bundled by banks. Standard & Poor warned, "Declining investor participation means reduced capital and liquidity, which may affect homeownership and borrowing opportunities." Barclays Capital -- extrapolating from a similar program recently unveiled in California -- estimates that only about 12 percent of all subprime borrowers, or 240,000 homeowners, would get relief.

POSSIBILITIES FOR REAL RELIEF: Though some conservatives have derided Bush's already paltry plan as a "taxpayer-financed bailout," it is clear that the government needs to take more dramatic action to help American families stay in their homes and forestall larger shockwaves across the larger economy. Among other measures, "we need a Family Foreclosure Rescue Corporation (FFRC), which would issue new, fixed-rate mortgages to those borrowers 'under water' and facing default or foreclosure. In the process, the FFRC would buy up the old adjustable-rate mortgages from lenders and investors and replacing them with new, tax-friendly government-rated bonds equal to the current value of these homes," Jakabovics said. Rep. Joe Baca (D-CA) has proposed legislation to take this necessary step. Last month, the House passed the Mortgage Reform and Anti-Predatory Lending Act, which requires lenders to ensure a borrower's ability to pay, prohibits unfair lending practices like steering, and creates the Office of Housing Counseling, among other provisions. The Senate has yet to take up the bill. The Center for American Progress has also called for an increase in federal funds to target key cities and states facing the highest risk of mass foreclosure and a strengthening of programs that aid families while their mortgage contracts are renegotiated. "Any plan from the Administration that falls short of this goal of providing long-term affordability will merely defer mass foreclosures to a later date," Dodd said.

IRAN -- KRISTOL CLAIMS IRAN HALTING NUCLEAR WEAPONS PROGRAM IS 'ANOTHER FEATHER IN THE CAP FOR IRAQ INVASION': Yesterday on Fox News Sunday, Weekly Standard editor Bill Kristol claimed that the reason Iran halted its nuclear weapons program in mid-2003 was because of the U.S. invasion of Iraq. "I believe we invaded a neighboring country in 2003 and removed their dictator and that sent shock waves through the region and at the time people were quite worried," said Kristol, later adding, "This is yet another feather in the cap for the invasion of Iraq." NPR's Juan Williams responded by calling Kristol the "iron glove," asking, "So you want us to start invading everybody everywhere? That'll stop all nuclear proliferation?" Kristol replied that if it works, it's "a pretty good thing." Kristol has no proof for his claims. The unclassified key judgments of the National Intelligence Estimate never once mention the Iraq invasion. If anything, Iran has been empowered by the Iraq war. As the Los Angeles Times noted in 2006, Iraq has now "placed power in the hands of the nation's Shiite majority and its Kurdish allies, many of whom lived as exiles in Iran and maintain strong religious, cultural and linguistic ties to it."

TORTURE -- 'WELL-INFORMED' SOURCE TELLS CBS THAT TAPES WERE DESTROYED TO PREVENT PROSECUTION: On Friday's edition of the CBS Evening News, national security correspondent David Martin reported that a "well-informed source" informed the network that the CIA destroyed the interrogation videos to "avoid criminal prosecution." On Thursday, in a memo to CIA employees, Director Michael Hayden claimed that the videotapes were destroyed because they "posed a serious security risk" by potentially permitting "identification" of CIA officials "who had served in the program." Yet CBS's Martin reported that a high-level anonymous source confirmed that the excuse wasn't not true. "A well-informed source tells CBS News the videotapes of the interrogation of two high-level al Qaeda operatives were destroyed to protect CIA officers form criminal prosecution," said Martin. On Friday, Sen. Carl Levin (D-MI) scoffed at Hayden's rationale for destroying the tapes, calling it a "pathetic excuse." "You'd have to burn every document at the CIA that has the identity of an agent on it under that theory," Levin said. Sen. John McCain (R-AZ), however, said he would not side with calls for an investigation because he believed the CIA's actions were legal. "That doesn't mean I like it," McCain added.

MEDIA -- O'REILLY CALLS PRO-CONSTITUTION AD 'BLATANTLY ANTI-AMERICAN': The Center for Constitutional Rights recently produced an ad called "Rescue the Constitution" that criticizes the Bush administration for "destroying the Constitution" through the use of tactics like renditions and torture. Fox News refused to air the ad, claiming that it needed "documentation" that the Constitution "is indeed being destroyed." While discussing NBC's initial refusal to run an ad from the White House front group Freedom's Watch, Fox News's Bill O'Reilly explained that "Fox News turns down blatantly anti-American ads. We just turned one down recently." It is not anti-American to believe Bush has shredded the Constitution. In fact, 55 percent of voters believe Bush "has abused his powers in a way that rises to the level of impeachable offenses." Fox previously refused to run an ad that was critical of then-Supreme Court nominee Samuel Alito. The decision was seen as an "effort to shield President Bush's choice for the high cour

Operatives within the CIA's clandestine service were reportedly turned down when they asked former Director George Tenet for permission to destroy the torture tapes.

Several former CIA colleagues describe Jose Rodriguez as "a cautious operator who probably would have ensured that top CIA managers knew of the plan" to destroy the torture tapes. One former official said Rodriguez was concerned that midlevel officers would get in trouble despite the fact "they were carrying out the direction from higher-ups."

Senate Foreign Relations Committee Chairman Joe Biden (D-DE) yesterday called on the Justice Department to appoint a "Special Counsel to investigate the CIA's destruction of videotapes that included the interrogation of terrorism suspects."

A year after being involved in a partisan purge by the Bush administration, most of the fired U.S. attorneys "have landed on their feet, in law partnerships or private-sector jobs where their compensation dwarfs government pay. Some carry scars from the experience. Six of the attorneys marked the anniversary of their firings at a private dinner in San Diego 10 days ago, where they toasted one another for persevering."

Army leaders are pushing to shorten tour lengths for active-duty soldiers in Iraq back to 12 months by summer, though senior commanders in Baghdad appear reluctant to commit to a change. In April, Defense Secretary Robert Gates extended tours to 15 months to enable the "surge."

China and the United States, the world's top two polluters, "say they are not ready to commit to mandatory caps on greenhouse gases." At the U.N. climate talks in Bali, the United States has instead indicated that it will "come up with its own plan."

The New York Times writes, "Congressional leaders, who have disappointed frequently this year, have done it again. This time, the House leadership has failed to find a way to get a bipartisan law against hate crimes passed and signed into law."

"The United States is rife with racial discrimination and the authorities have an 'abysmal' record on promoting equality," according to a report by a coalition of 250 civic groups published on Monday. The report says U.S. minorities "face discrimination in a range of areas including voting, policing and education."

And finally: Appearing on NPR's quiz show "Wait, Wait...Don't Tell Me" over the weekend, White House Press Secretary Dana Perino revealed one of her most stressful moments on the job. During a White House briefing, a reporter referred to the Cuban Missile Crisis, and Perino "panicked a bit" because she didn't "know about" it. "It had to do with Cuba and missiles, I'm pretty sure," she said. When she told her husband about the incident, he simply said, "Oh, Dana."

The research team that brings you The Progress Report and ThinkProgress.org needs spring interns! Click here for more information.

"House-Senate negotiators unveiled legislation Friday that would restore collective bargaining rights to unions at the Defense Department, permit the Pentagon to go forward with new pay rules and perhaps ease the angst of many Defense employees."

ALABAMA: Former governor Don Siegelman's daughter urges citizens to tell Congress to continue investigating the allegedly political prosecution of her father.

CALIFORNIA: More on Gov. Arnold Schwarzenegger's (R) partisan redistricting proposal.

CIVIL RIGHTS: "A lesbian couple that married in Massachusetts cannot get divorced in their home state of Rhode Island, the state's highest court ruled Friday."

THINK PROGRESS: Ron Suskind: White House efforts to pin full blame on CIA's Jose Rodriguez for destruction of torture tapes are "hard to believe."

PRESSING MATTERS: In writing about the CIA tape scandal, most news outlets avoid using the word "torture."

POLITICAL ANIMAL: What the destroyed CIA tapes likely would have shown if they still existed.

ON THE RECORD: The ONE campaign pushes presidential candidates to go "On The Record" with "their plans to combat extreme poverty and global disease."

"I didn't say that we should quarantine."

-- Former Arkansas governor Mike Huckabee, 12/9/07, on AIDS patients

VERSUS

"If the federal government is truly serious about doing something with the AIDS virus, we need to take steps that would isolate the carriers of this plague."
-- Huckabee, 1992

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'Too Little, Too Late' Subprime Solution

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