Inherited merit is perceived as un-American and justifiably so in the land of supposed equal opportunities. Historically, the “Far West” belongs to the enterprising and courageous pioneer, the indentured servant who paves his or her own way after voluntary conscription, the “failure is not an option” entrepreneur, the hard working immigrant, the colonial self reliant.
Tragically, America’s current housing crisis makes a complete mockery of this vision. More than a policy day late and a refinancing dollar short, now we have turned our underwater homeowners into Katrina-like refugees, disenfranchised in their own land.
Recent revelations by National Public Radio, ProPublica, and the New York Times prove that Fannie Mae & Freddie Mac decided to spice up their investment portfolios with Wall Street securitized financial weapons of mass destruction and just like Goldman Sachs, Citigroup, and so many others, bet against their own unsuspecting clients. According to the New York Times, “Public documents show that in 2010 and 2011, Freddie & Fannie set out to make gains for their own investment portfolios by using complex mortgage securities that brought in more money for Freddie & Fannie when homeowners in higher interest-rate loans were unable to qualify for a refinancing.”
Concurrently, Freddie & Fannie instituted a policy of approving few if any mortgage modifications including short refinancings with the net result of trying to guarantee that their investment bets based on underwater homeowners continuing to pay artificially high mortgage interest rates would hit the jackpot. Additionally both Freddie & Fannie incentivized mortgage service providers through a series of commissions and paybacks to foreclose rather than modify their portfolios regardless of any devastating effects on affected homeowners, claiming their insistence on this distorted process protected the highest fiduciary interests of shareholders in a national context even though individual taxpayer stakeholders ended up cheated by their own government.
In “Living by Default”, James Surowiecki in the New Yorker (December 19/26/2011) railed against the double standard of corporate borrowers allowed to default while victimized homeowners with underwater mortgages often through no fault of their own have been stigmatized, threatened, and punished. The investment moves by Fannie & Freddie double down on this dichotomy and highlight these two government sponsored institutions in flagrant conflict of interest positions against their trusting citizen clients. Foreclosed by these institutions instead of being helped to keep their homes under better and more realistic mortgage conditions and cheated out of more advantageous refinancing possibilities, between ten to twenty million homeowners have been duly defrauded by this charade masquerading as “the best we could do” government policy which has ended up fomenting national income inequality by destroying what’s left of the home equity safety net at the center of the American Dream.
This is truly a 1% solution against the 99% that have bailed out the 1%. U.S. taxpaying citizen homeowners have the right to claim the burden of “Illegal Triple Indemnity” which means being punished three times for the same misdemeanor under U.S. constitutional law. A triple indemnity burden results in taxing homeowners three times for the same crime committed by others: first by having taxpayers bail out these institutions; second by continuing to have to cover the legal fees and unjustified exorbitant salaries of Fannie Mae officials rewarded for failure as evidenced by sequential loss-producing quarters with public funds; and third by subsidizing home values that no longer correlate to any sense of public trust because both Fannie and Freddie preferred speculative financial bets against their own clients than attending to the welfare of those they were entrusted to serve.
By refusing to modify toxic real estate loan balances to reflect accurate post-Great Recession home values, Fannie and Freddie have forced American homeowners to either pay something for nothing or foreclose and lose their homes. The Financial Times reports using research firm, Core Logic’s figures, that “borrowers with negative equity owe about $700bn more on their housing debt than their homes are worth.” That’s about the price of the bankers’ 2008 TARP, and it has been very apparent to ‘Joe and Josephine Homeowner’ that what’s good for the goose never trickled down to the gander. Bailing out Fannie and Freddie thrice over by the American taxpayer translates into triple indemnity under any normal definition. Double indemnity is considered illegal and un-American. Triple indemnity even more so.
The jury of our peers in this national campaign season holds on a bipartisan basis that our leaders are more interested in self-preservation and ideological crusading than in restoring working class mobility through middleclass homeowner stability to pursue real community sustaining job opportunities across all domestic markets. What’s missing from an enlightened self-interest national portfolio is an easy to understand underwater homeowner version of a “Cash for Clunkers” program where one can trade in an underwater, higher-rate mortgage for a lower rate version that reflects more accurate marketplace values following the post Great Recession home equity tsunami aftershock.
Current polls show an intrinsic national rejection of passive income being taxed at a lower rate than wages earned through present tense toil. Those not in the bailed out class instinctively perceive that politicians and financial sector lobbyists orchestrated banking industry all-cash white collar welfare transfers from the tax receipts of citizen homeowners who four long years later are still being tossed insufficient loan scraps and aggressive involuntary foreclosures by the bankers they saved. What “goes around” has not yet achieved the “comes around” stage and the resulting income inequality tension is killing the country’s spirit, literally, by diluting any willingness to believe again in the unlimited American exceptionalism frontier beyond a superficial folklore memory appeal that elicits emotional applause along the campaign trail.
In short, a civic crime has been committed by the U.S. government against the underwater American homeowner client in an America where one in four homeowners is currently under water. Even if Fannie & Freddie could prove projecting forward that relatively less public money would be lost to the U.S. Treasury by protecting their investment bets at the expense of mortgage modifications, the stalled economic recovery highlighted by stubborn structural unemployment indicates that the spiritual disease already inflicted is more dangerous, pernicious and costly to our collective future than any financial cure however “redistributionist.”
The American taxpayer-underwater homeowner was ignored, defrauded, abused, discredited, and then foreclosed by bailed-out private and public sector institutions that have now been shown to perpetrate crimes against the public trust. Nobody had the peoples’ backs on this and real justice is way, way overdue.