Thursday, June 9, 2016

Is Hillary Clinton the Worst Human Being in the Universe? Mortgage Crisis

Foreclosed homes, 2009. Photo by Will Steacy.
So here's this thing from U.S. Uncut last January where

Video Surfaces of Hillary Clinton Blaming Homeowners for Financial Crisis

That doesn't sound very nice of her, does it? That sounds like blaming the victim! But then again, it is (following a 13-second clip from the Democratic debate of October 13 2015 as introduction) a 14-second clip of three extracts from a speech, presented at NASDAQ on December 5 2007, just as the subprime crisis was staring to blow up, and you can see that it didn't exactly "surface"; it was fairly carefully edited by people who knew what they were looking for. And even as edited it doesn't say what the headline says: (a) she wonders who's to blame for the housing crisis, (b) there's a lot of blame to go around, and (c) a certain type of "homebuyers" (not homeowners) deserve some small portion of it.

If you go on to look at the text (which the U.S. Uncut site did helpfully link), you can see that the homeowners' share as she saw it was pretty small. She started with the lenders and brokers
who irresponsibly lowered underwriting standards, pushed risky mortgages, and hid the details in the fine print.
Then the Bush administration and its regulatory agencies,
who failed to provide adequate oversight, and who failed to respond to the chorus of reports that millions of families were being taken advantage of.
Not neglecting the rating agencies, whose criminal misconduct wasn't clear at the time,
who woefully underestimated the risks involved in mortgage securities.
Or the families who were being taken advantage of either, though they don't deserve the same opprobrium that goes to the casual traders who were flipping houses they had no interest in living in just to suck up some of the profits floating around for the taking,
And certainly borrowers share responsibility as well. Homebuyers who paid extra fees to avoid documenting their income should have known they were getting in over their heads. Speculators who were busy buying two, three, four houses to sell for a quick buck don't deserve our sympathy.
But that's just the entremets, the sherbet, you know, before the big fat meat course, the villain she wants to single out, which is—her audience:
But finally, responsibility also belongs to Wall Street, which not only enabled but often encouraged reckless mortgage lending. Mortgage lenders didn't have balance sheets big enough to write millions of loans on their own. So Wall Street originated and packaged the loans that common sense warned might very well have ended in collapse and foreclosure. Some people might say Wall Street only helped to distribute risk. I believe Wall Street shifted risk away from people who knew what was going on onto the people who did not.
Wall Street may not have created the foreclosure crisis, but Wall Street certainly had a hand in making it worse.
Not the slimy speculators, you see, let alone the ignorant home-buyers, or the fraudulent rating agencies that made the loans look better than they were or the feckless government that looked the other way or even the incompetent bankers who made the garbage loans in the first place, but the ruthless Wall Street Titans she was talking to who made it all possible by taking them off the bankers' hands, slicing and dicing those pieces of shit into incomprehensible tranches so that nobody would be able to tell how worthless they were until the whole thing crumpled and collapsed, which they thought in their greed would never happen, and which was just beginning to happen as she spoke.

That's what she told Wall Street. You can argue she let them off easy, because she didn't use a lot of fiery language or give them all the blame, but I think she told it like it was, and pretty early.

And for what she thought of the homeowners, you can go back months before that, to a speech to the National Community Reinvestment Coalition on March 15 2007. Yes, they "should have known they were getting in over their heads," but she knows why they didn't:
Well, we have to put ourselves in the shoes of a parent signing a mortgage product unaware of a complicated, escalating payment formula that has been worked out on some computer that has balloon payments and pre-payment penalties, which includes the cost of taxes and insurance, and other added on costs that the owner doesn't really understand and nobody takes the time to explain them. Clear and easy to understand disclosure, plain talk meant to inform, not to confuse must be the starting point. Buyer beware is just not enough.
So, I also propose a stop to pre-payment penalties designed to trap borrowers when payments skyrocket. These penalties apply to 70 percent of sub-prime mortgages but less than five percent of prime mortgages.
Now, we can imagine a family stuck in this subprime catch 22. A family tries to be responsible and pay down on their principal and even make payments ahead of time. But, in the fine print they learn that unlike everything else in their world, if they pay things off and get ahead, there's going to be penalties imposed on them. This is totally perverse. So they're stuck waiting for the rate to go up instead of being given the opportunity to protect themselves. And then they may very well find themselves on the brink of foreclosure.
And calling further for counseling to be made available for buyers, to help them avoid those traps ("more than one third of subprime borrowers could qualify for lower rate prime mortgages, but many low income and minority borrowers are simply unaware of their options"), options for convincing lenders to delay foreclosures, rescue funds, and bigger credit unions to displace the commercial banks in the business (which puts her well to the left of Elizabeth Warren on this detail).

Did she stop the subprime mortgage crisis from happening? No, indeed, she did not, and it's not clear that she did a lot to stop it (not much at all, according to Uncut's source Whitewater fabulist Jeff Gerth, who has been trying to destroy her for 25 years), but she did propose a revival of the 1933 Home Owners' Loan Corporation, a great New Deal program that died at the beginning of the 1950s for refinancing loans for owners in difficulties, which would have done far more than the provisions the Bush administration got instead in the 2008 Housing and Economic Recovery Act or Obama's impotent HARP.

That's not at all the point I want to make, in any case. Everybody knows she's smart, and at least a little smarter than her very smart husband. The thing I want to highlight is the way she tends to work, intellectually, from particular cases and particular suffering, out towards a broad policy idea, from the close observation of March 2007 to the big prescriptions of fall 2008. You see the same in some of her relatively bad decisions, in Libya and Syria, motivated by the horror of people's lives stranded in civil wars in those countries (in Iran, where even Mossad couldn't convince her that they weren't building a nuclear weapon, she seems to have thought in the opposite direction, from theory to specifics, out of a failure to imagine the reality of lives in Iran, and it certainly hasn't worked as well). The implication in that Uncut story (can't type that name without wondering if it's anti-circumcision) is in a sense worse than nasty, it's really dumb. And no, she's not the worst human being in the universe, or even close.

No comments:

Post a Comment