Right now more than 11 million Americans are underwater on their home mortgages - meaning they owe more money than their house is worth. There's an easy solution. Say somebody has a house with a $200,000 mortgage on it, but because of the Bush Crash the house is only worth $150,000. If the bank were to write down the mortgage to $150,000, then the homeowner could refinance at today's low rates, or sell the house - both of which would massively stimulate the economy. Banks don't want to do this because they'd have to come up with the $50,000 - but there's a mechanism already in place to take that load off the banks - and that's for Fanny or Freddie - who backstop about 80 percent of US home mortgages - to take the hit. There's even a law that lets them do it - it would get the economy up and running immediately and overnight. But Republicans in the Senate are blocking it - and they're succeeding because they have an inside man on the job.
Meet Ed Demarco - the acting director of the Federal Housing Finance Agency - which oversees mortgage giants Fannie Mae and Freddie Mac. And according to Huffington Post Business Editor Peter Goodman - DeMarco is, "The single largest obstacle to meaningful economic recovery and a man who most Americans have probably never heard of..." With 11 million Americans locked in their homes because they're underwater - and millions of them staring down foreclosure - then Edward DeMarco holds enormous power. And it appears he's using his power to hinder any efforts by President Obama to repair the economy. Economists know that the best way to save the housing market is to refinance mortgages for underwater homeowners - writing off principle balances and lowering interest rates. Within month that would allow people to move out of homes they can't afford - and buy a new home elsewhere - sparking another real estate boom. Plus since American will no longer be paying into an underwater mortgage black hole - they'll have more money to spend elsewhere and stimulate the economy.
President Obama has insisted that much of the recent $25 billion mortgage fraud settlement with the banksters should go directly to this kind of refinancing - although governors like John Kasich have said they'll use it for other things. The President's Housing Secretary Shaun Donovan is also calling for widespread home refinancing. And Democrats in Congress are pleading for refinancing assistance for struggling homeowners as well. But none of the people I just mentioned can actually do it - none of them can actually force refinancing. However Ed Demarco can. Since Fannie Mae and Freddie Mac are currently backstopping all of these mortgages in America - including more than 3 million underwater mortgages - it is up to those two agencies to sign off on refinancing since they're the ones that will primarily take the hit. Meaning it's up to Ed Demarco as the head regulator of Fannie Mae and Freddie Mac - and DeMarco is saying "no way."
Basically - DeMarco is saying that since his job is to clean up the books at the mortgage giants - so he shouldn't let them spend money on refinancing. Plain and simple - he's looking at the bottom line - and not at the ongoing housing crisis. It's like refusing to put out a fire in your kitchen with water from your sink - because you don't want your water bill to go up. And despite all the pressure coming from the Obama Administration and coming from Congressional Democrats who are collecting 85,000 signature in a petition to have DeMarco removed from office - DeMarco isn't budging. It's as though he got his marching orders from Mr. "Our job is to make Obama a one-term President" - Senator Mitch McConnell - who, by coincidence (ahem), is making this whole fiasco worse. You see - President Obama made the mistake of appointing DeMarco as acting director back in 2009 - a decision the President immediately regretted when DeMarco turned out to be just a shill for the banksters and the Republican Party.
So - the President last year nominated North Carolina banking commissioner Joseph Smith to replace DeMarco and finally give aid to struggling homeowners. Unfortunately - Mitch McConnell's Republican Senaters refused to confirm Smith - thus keeping DeMarco in his "temporary acting" job, standing in the way of a housing market recovery. In other words, there's a giant boulder in the road to economic recovery - and Republicans aren't letting the President remove it. Jobs numbers might be improving in recent months - but if American HOMEOWNERS don't get the relief they need - then this recovery will be short-lived. So call your Republican Senators and ask them why they're blocking help for homeowners.
Ask them why making the President Obama a one-term President is more important than helping out 11 million American homeowners. Ed DeMarco needs to go - and the President is trying to get rid of him - and we need to put pressure on Republicans to let his replacement take his job.
Thom Hartmann is a Project Censored Award-winning New York Times best-selling author, and host of a nationally syndicated daily progressive talk program on the Air America Radio Network, live noon-3 PM ET. www.thomhartmann.com His most recent books are "The Last Hours of Ancient Sunlight," "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights," "We The People," "What Would Jefferson Do?," "Screwed: The Undeclared War Against the Middle (more...)