Reuters Political Blog: An August Surprise from Obama?
Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.
The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie.
Johnny brought this to my attention and, honestly, I don’t know what to think of it. If the White House would be looking at the chance to essentially buy votes with an enormous bailout for bankers as a vehicle for political gain, I don’t think this HARP will work. Author James Pethokoukis notes that “[t]he political calculation is that the number of grateful Americans would be greater than those offended that they—and their children and their grandchildren—would be paying for someone else’s mortgage woes,” but I think that any attempt to weigh political gains and losses need to look at those two factions individually.
First, “those offended” will be further offended by HARP. Those people, that first faction, are the ones who will very likely hand Barack Obama and his party a devastating loss at the polls in November. They look at any sweeping action originating in Washington, D.C. as detrimental to their lives, lifestyles and bank accounts. They root for governmental inaction. So, while HARP might be another piece of legislation that President Obama could include in his list of accomplishments in the presidential debates preceding the elections in 2012, for now any action from Capitol Hill would be perceived as action taken against the interests of the American people.
Second, those “grateful Americans” will likely be those that the Democrats are already counting on to temper the sting of the losses in November. They’re the inner city voters who have not yet figured out that this administration’s “accomplishments” have made the prospect of recovery and job gains less likely than it was before the uncertainty from the stimulus bill and the health care bill and everything in between took hold. They’re also the ones who will look unfavorably on any assistance given by this administration to banking institutions, and they will be more susceptible to advertisements correctly showing that the Democrats are just as in-bed with bankers as are Republicans, if not more so.
At the end of the day, HARP is just another excuse for this administration to trade taxpayer money for strings-attached governmental control. Right or left, there is no political gain to be had here. If the president and his party is looking for political gain, they should announce the extension of the Bush tax cuts, and further cut taxes across the board. That, my friends, would be a start. That, my friends, could save their own butts. They could call it DARP: Democrat Action Relieves their Posteriors.