One of Obama’s most controversial appointees yet was sworn in as director of the Federal Housing Financial Agency last month. Democratic representative Mel Watt now oversees Freddie Mac and Fannie Mae, the two giant government-owned mortgage companies.
Ironically, he was also one of the chief architects of the housing bubble that popped in 2007, sending the US economy and much of the rest of the world into a major recession.
Watt was chairman of the Congressional Black Caucus and is perhaps best known for pushing banks to give risky loans to blacks and other minorities who could not afford them. In the lead-up to the housing bubble, he drafted legislation that would have pushed banks even to give mortgages to people on welfare as long as they could come up with $1000. To placate the banks, which rightly resisted his plan, Watt called on the government to cover any losses incurred by banks by guaranteeing the mortgages.
In October of 2002 Watt announced the public-private partnership called “Pathways to Home Ownership.” This was a plan designed to coerce banks to give mortgages to people even if they could not scrape together a down payment.
Watt’s main approach to the mortgage market always seems to be to get people to buy homes whether they can afford them or not. He worked to expand government mortgage insurance programs, government handouts, and generous tax credits. Even in 2007, when the housing market was imploding from all these subprime loans, Watt encouraged passage of a bill to force Fannie and Freddie to make even more loans to non-creditworthy minorities in inner cities.
Watt fought vehemently against any efforts to reduce subprime lending. He and former Rep. Barney Frank led the successful effort to block the 2003 Fannie and Freddie reform effort.
Watt has already told us, in fact, what his new agenda will include: He STILL wants to reinflate the housing bubble by helping voters to buy houses they cannot afford.
Even before he was confirmed, Watt pledged to stop the planned increases in government-backed mortgage fees — increases that were designed to wean the mortgage market off government subsidies. He also put his name on a letter calling on Fannie and Freddie to forgive the debts of underwater homeowners who speculated on houses at the height of the bubble.
NORM ‘n’ AL Note: Mel Watt sounds like he fits right in around the Obama administration, doesn’t he? Just one more Democrat who thinks the US government, which is already printing money as fast as the presses will run, has all the answers in addition to having all the money. How do we manage to find all these idiots…and then actually get other people to believe in them enough to put them in a position to cause more havoc? Did Mr. Watt learn nothing at all from the past six or seven years?
Mel Watt’s record is public knowledge. So why didn’t Republicans challenge him on it, rather than criticizing his lack of business experience? Here’s one reason: Everybody is afraid, in Washington DC today, of being called a racist. No one wants to be associated with anything that can be twisted or perceived to be against minorities. The race card is a powerful motivator in today’s political climate.
Additionally, Republicans were complicit themselves in the housing bubble and in pushing banks to issue risky loans to people who could not afford them.
But there is a bigger reason.
Big banks and real estate groups are some of the biggest donors to BOTH political parties. As the Center for Responsive Politics points out, players in the financial industry (commercial banks, investment banks, and insurance companies) are three of the top five contributors to Watt’s past election coffers.
That makes Mel Watt just the right man for Wall Street. He said he wants to reinflate housing prices, and he is all for lowering the lending standards again. The big banks couldn’t be happier. They love giving subprime loans to those who can’t afford them, because now they know the government will subsidize them and bail them out when things go wrong.
By appointing Watt as the mortgage market regulator, Obama has signaled that government-backed loans are here to stay.
So brace yourself. Housing Bubble 2.0 appears to be right around the corner.
[from an article published in the current issue of THE TRUMPET]
As always, posted for your edification and enlightenment by
NORM ‘n’ AL, Minneapolis