Friday, October 28, 2011

Does it matter that “the 99 percent” are heard by the CEO of Freddie Mac?

The irony wasn’t lost on some members of the CEO’s Club, lunching this week at the Boston Harbor Hotel to hear Freddie Mac Chief Executive Officer Ed Haldeman, Jr. discuss the restructuring of the agency that plays a key role in the home mortgage market. As Haldeman was laying out the need for transparency in Freddie Mac, or any possible successor entity, housing activists from Jamaica Plain were chanting and carrying signs outside the dining hall, calling for help with foreclosures and mortgage availability. While Haldeman interrupted his presentation to say he “understand(s) their concerns,” the giant window shades lining the hotel’s Wharf Room were quietly being lowered so the protesters couldn’t look in—or those inside couldn’t look out. For those who “got it,” the symbolism was compelling.

No doubt the demonstrators probably view those on the inside as having all the power and those on the outside as having none. They share that perspective with the Occupy Boston protesters down the street in Tent City. All these demonstrators are giving voice to their frustrations, though they have not advanced a concrete agenda for addressing our economic problems.

Some of the executives in attendance noted, not incorrectly, that the protests would be better carried out on Pennsylvania Avenue than Atlantic Avenue. But none expressed any confidence that Washington would agree on any solutions until after the 2012 election. Being told, by implication, to wait at least another year is what’s driving many of the protesters.

Haldeman has been on the job at Freddie Mac for just two years. His principal concern is getting private capital to return to the mortgage market. Right now, the government, especially Freddie Mac and Fannie Mae back 90 percent of the mortgage market, providing liquidity and stability, helping to keep interest rates low. The agencies are like private companies and have boards of directors, but are under the scrutiny of the Inspector General. The U.S. Treasury owns 80 percent of their stock. $65 billion of U.S. taxpayers dollars was appropriated to protect the solvency of Freddie Mac, and the agency is paying interest on that at the rate of $6.5 billion a year. It’s unclear if the taxpayers will ever get their money back. And the Obama Administration is considering phasing out Freddie and Fannie Mae altogether.

Haldeman wasn’t there for the meltdown, when worthless mortgages were bought from originators and wildly resold in the secondary market. While he notes that enabling people to buy homes they can’t afford isn’t doing anyone any good, he has been working with others to slow foreclosures through changing the rules for refinancing. Going forward, he calls for lowering the limits on how much people can borrow and raising what they need for down payments. He calls for more widespread availability of sound mortgage products, especially long-term fixed rate mortgages. It’s not clear that his philosophy of gradualism would pacify the most insistent of local demonstrators. Today proved nothing because it appears there was no interaction, before, during or afterwards. And, as Haldeman, noted he’s ultimately controlled by 535 members of Congress, each with a different set of priorities.

As put by an Associated Press story today, “the mid-decade housing boom and subsequent bust took a toll on virtually all age and race groups.” Haldeman insists there is still a role for government in backing mortgages for homeowners but is uncertain whether that will be Freddie Mac or a successor agency. The timing, he knows, depends on the political environment. So the anti-bank, anti-government protesters do their thing, on the outside of the meeting place trying to look in, and a seemingly competent and well-intentioned executive lays out the problem, with no end in sight to an audience short of answers.

President Obama, in the absence of Congressional action, sees his weak approval numbers and claims “we can’t wait, “ so he offers a band-aid to a piece of the problem. President Obama, in the absence of Congressional action, sees his weak re-election numbers and claims “we can’t wait, “ so he offers a band-aid to a piece of the problem. His likely opponent, as of now, Mitt Romney seems to advocate a Social Darwinist approach of letting nature take its course on foreclosure unraveling.

Could make for an interesting debate topic a year from now, but the lack of resolution or a even strong path out of the housing mess doesn’t augur well for any robust economic recovery in the months ahead.

Please let me know your thoughts in the comments section below.

Saturday, October 22, 2011

Occupy Boston and the Wall Street/Washington mess

A family medical crisis that keeps you from even reading the newspapers not only interrupts blog writing. It also gives you a distance from breaking events that provides perspective on what’s important and what’s not. For example, the obsession with the Red Sox collapse and the details of Theo’s new contract with the Chicago Cubs matter not a whit. Nor even does whether Mitt Romney invaded Rick Perry’s space by putting his hand on Perry’s shoulder in a face-down in the last GOP debate.

In emerging from the family medical situation, I am struck by the endurance of Occupy Boston. As a veteran of the anti-Vietnam War movement, I find it kind of reassuring that people today care enough to participate in this protest, even though the goals are still quite diffuse. Like its sister movements around the globe, it’s unclear what the ultimate outcome will be. But the cri de coeur is quite understandable when you read that 17.1% of Americans under 25 are out of work. Numbers in Europe are worse - 46.2% in Spain . Without systemic change, their future is likely to be a lot bleaker than that of their parents. As The Economist points out this week, it’s time to “tackle the causes, not the symptoms.”

There has been some talk (including from the highly respected Boston Municipal Research Bureau’s Sam Tyler) that the protesters should help defray the costs of police protection. But why should they do so any more than the Tea Partiers, SEIU, or fans gathering for local sports heroes victory parades ?

Occupy Boston is a demonstration of First Amendment rights and is a testament to the strength of our democracy. As long as a few bad apples, don’t despoil the protest, I find it moving. Wouldn’t it be a public relations coup of the first order if some of the one percent, society’s most privileged, were to contribute voluntarily to the costs? Can you imagine Bank of America CEO Brian Moynihan donating $100K out of his own pocket to Boston for the public services incurred responding to those protesting the excesses of some of the financial institutions crushing the other 99 percent? His Boston office is half a block from tent city, at 100 Federal Street. Has he stopped by Occupy Boston? Others could follow. This gesture should be in addition to, not in place of, taking the high road in restructuring expeditiously a significant number bad housing loans in its portfolio and opening the spigot to provide business loans to deserving businesses.

We need a healthy banking system, probably one more like that envisioned by former Fed Chairman Paul Volcker, the one that existed prior to the Clinton Administration’s signing of legislation ending the Glass-Steagall law and effectively deregulating banks. But, if you have any doubt about how Wall Street controls Washington (especially under Treasury Secretary Tim Geithner), check out Ron Suskind’s new book Confidence Men.

Suskind details the early years of the Obama Administration and how the President , who thrilled us as a candidate and may still be preferable to any of his opponents, has been an ineffective leader, even an ineffective manager. In the quiet of the Oval Office, what does the President - in the wake of his squandering earlier opportunities to do systemic financial sector reform - really feel about Occupy Boston, Occupy Wall Street and other protests?

We know Obama’s campaign will try to turn the protests to a campaign advantage. But the solutions to the problems lie in going after both Washington and Wall Street. And fixing things will require more than clever ads and bumper sticker slogans.

Please let me know your thoughts in the comments section below.

Sunday, October 16, 2011

Transparency a hollow catch-word for Obama

Barack Obama, both candidate and President, promised the American people the most transparent administration in our history. But the reality is far less than that. The Obama Justice Department is challenging a district court ruling that the Secret Service logs kept of visitors to the White House should be open records. According to Politico, the District Court Judge, Beryl Howell, (an Obama appointee) would make exceptions only for matters of security and (presumably legitimate) privacy considerations.
But the Obama administration took exception to her correct decision and is now appealing the lower court decision much the same way former Vice President Dick Cheney fought to keep secret the records of visits to his office from high-powered executives of oil and gas companies.

This should not surprise anyone who has tried to use the Freedom of Information Act (FOIA) under the Obama administration to access Justice Department, State Department or other agency records. The Supreme Court has said that FOIA is a means for “citizens to know what their government is up to.” Such requests are routinely met with bureaucratic foot-dragging, obfuscation, and procedural encumbrances. One loyal Democratic member of the Massachusetts House delegation has ruefully concluded that the Obama Administration, while giving lip service to transparency, is no better on this issue than that of George W. Bush.

The plaintiff in this case is Judicial Watch, seeking records of those who have had access to the White House during 2009. Admittedly, Judicial Watch is an ultra conservative organization with a predilection for seeking accountability from Democratic administrations. But the principle of accountability applies to the Obama Administration no less than any other, especially given the President’s lofty pronouncements of transparency.

The President directed that FOIA "should be administered with a clear presumption: In the face of doubt, openness prevails." Obama has also directed that agencies shouldn’t withhold information just because "public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears."
But, while the Obama Administration may have declared a “new era of open government,” saying it doesn’t make it so.

The Secret Service, which keeps the records, maintains they are White House records and therefore not subject to FOIA, as regular agency records would be. This is just déjà vu all over again, yet another disappointing reminder that, instead of sailing with “The Audacity of Hope,” as we did in 2008, we are now experiencing the triumph of experience over hope.

Please let me know your thoughts in the comments section below.

Thursday, October 13, 2011

Romney still on top after Republican GOP debate

No one really laid a glove on him in the New Hampshire roundtable “debate” Tuesday night. Mitt Romney looked Presidential. He had the right balance of certitude and affability. He was confident but not angry. After years of flip-flopping, and despite being wrong in some of his assertions, he at long last projects consistency. After all these years of campaigning, months as putative front-runner, Romney really seems to have found himself. It’s remarkable how far an unnuanced combination of mechanistic touting of a balanced budget amendment, deregulatory zeal, China-bashing and no cut military budgets has carried him. But there remains little enthusiasm for him. He is the preferred choice of far fewer Republicans than other GOP front runners at a comparable point of time in recent history.

Former Texas Governor Rick Perry, once seen as a formidable opponent of Romney, may turn out to have been something of a flash-in-the pan. While he avoided the melt-down of his previous debate performance, Perry was phlegmatic and skated the surface of issues. The moderator, the estimable Charlie Rose, was quoted in a post debate interview as observing that Perry never made eye contact with him, which would have indicated Perry wanted to re-engage in the conversation. But, if Perry can continue to raise money as he did last quarter, he will have staying power, regardless of his debate performances.

Herman Cain, the former CEO of Godfathers’ Pizza, is strong on crust but light on filling. Still, it is remarkable that, in some polls, he has risen to the top with Romney, largely on strong debate performance and his ability to market his 9-9-9 plan for replacing our current tax structure with 9 percent each of corporate taxes, personal income and national sales taxes. His plan, sounding simple and novel to those without a sense of history, is merely a combination of old flat tax and “fair tax” nostrums, without details. As highly credentialed Republican policy analyst Bruce Barlett wrote in the New York Times, “The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase.”

Former Idaho Governor Jon Huntsman, is more of an authentic moderate than Romney and should do well with New Hampshire voters. But in debates, that are key in forming first impressions, and with a primary party electorate still heavily animated by the Tea Party agenda, he doesn’t emerge as a force to be reckoned with.

Ron Paul and Michele Bachmann remain also rans and contributed little to the dynamics on Tuesday night. Libertarian Paul has an intensely loyal core following, and Bachmann could theoretically be the heir to a sizeable part of the Sarah Palin vote, but neither seems to be gaining traction. Rick Santorum's "family values" campaign added even less to the debate.

Charlie Rose did a great job of keeping the focus consistently on the economy, following up with the candidates when warranted and still not making himself the center of attention. The other questioners did well. The format was the best of any debate to date, though I’d still have liked more drill down in the follow-ups and less of the candidates answering questions with non-responsive stump speech sound bites.

Please let me know your thoughts in the comments section below.

Thursday, October 6, 2011

Warren passes her first test as one in a field of six

Elizabeth Warren demonstrated at this week’s debate that she is a real player, but, despite media raves, she didn’t necessarily hit the ball out of the park. The six Democratic candidates met Tuesday night in a non-debate at UMass Lowell, the event co-sponsored by the Boston Herald. The six were in agreement on virtually all the issues. The format permitted no follow up or real engagement. But it did permit the six to get out their core messages and somehow convey to the audience a sense of who they are. Perhaps this is all we can hope for a year ahead of next year’s primary.

For her part, Warren stressed her personal story, growing up “around the ragged edges of the middle class,” struggling to make ends meet, getting an education at public institutions, making it finally to her job at Harvard, and working to protect the consumer against the predatory practices of financial institutions. She was quick to point out that Forbes Magazine had named Scott Brown Wall Street’s favorite Senator and drily pointed out, “That’s probably not an award I’m going to get.”

Beyond her core message, what she successfully conveyed is her warmth and quick sense of humor. When a questionner, noting that Scott Brown had helped finance his college education by posing nude for Cosmo, asked the candidates how they had paid for school, she quipped, “I kept my clothes on. I borrowed money” Warren could actually be fun to follow.

Engineer Herb Robinson, who has absolutely no chance of winning, also demonstrated a sense of humor. In response to a time-wasting question about which super hero each candidate would choose to be, he said the answer was obvious, the Incredible Hulk, and jumped up to demonstrate his more than ample girth. Later, he attempted humor noting that, as an engineer, he knew the difference between hair spray and nuclear fallout. The “joke” sank like a rock.

City Year founder Alan Khazei promised to be the “ game changer” that Scott Brown had pledged to be, but didn’t deliver on. Khazei’s humor came in response to a question of legalization of marijuana. “I did inhale, and I enjoyed it.” But, he added, he doesn’t favor legalization. Khazei’s tone throughout the event seemed more poised, polished and confident than he did during his first campaign two years ago.

Immigration attorney Marisa DeFranco showed herself to be very spunky and confident. I’m sure that running for Senate will help her law practice. She’s feisty, articulate and very obviously courting the union vote as well as legal clients.

Bob Massie, a candidate for lieutenant governor in 1994, spoke of the battle he overcame with illness and implying he can come from behind in this race, too. He was not convincing, nor was three-term state rep Tom Conroy, who noted that he is the only candidate who has actually defeated a Republican incumbent.

I wouldn’t be surprised to see the primary boil down to a race between Khazei, who has raised a million dollars, and Warren. He tried to get her to agree not to accept PAC money and, as the race narrows, will probably try to don the mantle of the grassroots, anti-establishment candidate. Given their similarity on issues, however, it is their personalities and how effective voters think each would be in Washington that may be determinative.

Please let me know your thoughts in the comments section below.

Tuesday, October 4, 2011

Finding nuanced solutions to illegal immigration

It’s amazing that illegal immigration has become such a hot-button issue  even where the
population of undocumented workers is negligible. In Alabama, where about 3.5 percent of the population is foreign-born, a harsh new immigration law has caused many in that population to flee, taking children out of schools, avoiding trips to the hospital, even for child delivery, fearful to report crime. A federal judge upheld the new law, but, as the NY Times asks, does this “counterproductive cruelty” make sense?

Illegal immigration is not an inconsequential issue. As the Globe's Joan Vennochi has written, checking fingerprints of arrested suspects isn’t a “publicity stunt.”  T.C. Boyle’s novel The Tortilla Curtain, set in southern California, is a spell-binding yarn about the clash of cultures when self-described progressives come up against the complex realities of illegal immigration. I had a tiny taste of this (and, dear readers, I know it was but a tiny taste, so don’t waste your time sending outraged comments) when I was at a standstill in backed up traffic under the old stone bridge on Route 9 in Wellesley.

An old beat-up Chevy rear-ended me. In parking lot conditions, I got out of my car and walked back to suggest to the driver that, as traffic was about to start moving, we pull off at the gas station up ahead to exchange papers. He nodded. Shortly thereafter, I pulled off and watched in amazement as the driver who had rear-ended me kept going, speeding west on Route 9.

Then it dawned on me. The fellow was certainly Hispanic looking. Perhaps he was here illegally, driving without a license or without insurance. Damage to my car was negligible. But what if it were not? What if an injury had been sustained?

The point is that there are reasons for the rules of the road, both in reality and metaphorically. And people who see problems with illegal immigration shouldn’t automatically be dismissed as heartless. There is room, however, for balanced solutions.

Proposals have been filed in the Massachusetts legislature to bar state contracts with companies that hire illegal aliens (already against federal law) or that use drivers without proper motor vehicle licenses. A proposal also supports communities that want to participate in the U.S. Immigrations and Customs Enforcement agency’s Secure Communities Program, as three sheriffs in the Commonwealth already do. The Patrick administration refuses to participate, claiming that to do so would deter illegal immigrants from seeking help from local police.

I have no problem with a proposal to require social security numbers or federal Tax ID numbers for anyone seeking a motor vehicle registration, and increase penalties for people driving without a license or using a fake ID.

I take issue, however, with those who would bar in-state tuition for illegal residents. Many who would use this benefit were brought here as toddlers by their “undocumented” parents. Those students have grown up here and attended public schools. They are highly motivated to get an advanced education. We are not talking about their going for free, simply having to pay the lower, in-state tuition in the state in which they reside. If they get that education, they will become part of a skilled workforce and more than pay it back in taxes. Support for in-state tuition is one of the only appealing positions taken by GOP Presidential candidate Rick Perry, which, sadly and ironically, is one of the reasons his candidacy is going south.

The federal Dream Act would give certain undocumented individuals, who had come here as children and lived here for several years prior to consideration under the bill, the ability to gain legal status, either through college or military service. Aren’t these the kind of hard-working people seeking to improve themselves or serve the country, the kind whom we would want to become upstanding tax-paying citizens, to strengthen our workforce and/or our military. Aren’t they talent to be embraced? Isn’t it counterproductive to deny them the opportunity and ensure they remain part of an underclass?

Unfortunately, once seen as a step toward comprehensive immigration reform, the Dream Act has died, suffocated by hyper-partisanship in Washington. Washington gridlock has led to states passing their own immigration laws, mostly punitive, which the Obama Justice Department is now challenging.
Immigration policy should be a federal matter, and state laws should be consistent. But if states are going to act, Massachusetts should be on the right side of the issue. And that means a nuanced understanding of what is reasonable, and what is not.

Please let me know your thoughts in the comments section below.