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.



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