9/2/11
In the conventional wisdom, there is nothing President Obama can do to put Americans back to work in large numbers. He is a president supposedly held hostage by vengeful politics, holed up in a White House surrounded by lunatics and impotent hacks, with congressional combat rendering meaningful action impossible.
Nonsense. There is one thing the president can do right now, and largely by himself, if he finds the courage to command people working under him -- not least Treasury Secretary Timothy Geithner: He can help fix the distress in the housing market, which was the immediate trigger for the Great Recession, and which continues to play a major in preventing recovery.
The president can force mortgage companies to aggressively provide relief to homeowners who owe the bank more than their homes are worth, writing down principal balances. He can direct the Treasury, which supervises the administration's mortgage relief programs, to begin wielding serious sanctions against major lenders whose strategic incompetence and opportunistic intransigence have prevented meaningful numbers of troubled mortgages from being modified, keeping millions of homeowners stuck in foreclosure limbo.
The banks have succeeded in delaying and profiteering, collecting fees they levy for appraisals, insurance policies and other services, funneling this business through their own subsidiaries. Foreclosure, it turns out, is a profitable enterprise for many lenders. The Treasury could make it painful, altering the incentives at play for mortgage companies.
The president can also invigorate a now tiny program that is supposed to help people who are current on their mortgages refinance into lower interest rate loans. There, too, lenders have obstinately refused to deliver, keeping the country locked in a fitful economic purgatory.
If Obama did all of these things, he would put tens of billions of dollars in the pockets of struggling people, and he would create greater certainty in the marketplace. He would limit the overload of foreclosed homes piling up in the housing market, putting continued drag on housing prices. He could spur people now foregoing maintenance on their homes in anticipation of losing them to instead spend money to fix up their residences, generating demand for goods and services along with its happy offspring: jobs.
The president could do all of these things without having to negotiate with John Boehner, Eric Cantor, Mitch McConnell, or any of the other Republicans who are indeed doing their best to constrain effective policy in a cynical bet that a bad economy is a good electoral strategy for their party.
Would a muscular approach to housing by itself reinvigorate the economy? Hardly. Would it make a meaningful difference? Without question.
"It would be a great stimulus to the economy if a lot more people were making lower monthly payments on their mortgages," said Jared Bernstein, a former chief economic adviser to Vice President Biden and now a senior fellow at the Center on Budget and Policy Priorities, adding that significant relief could spell "potentially hundreds of thousands of jobs."
That estimate, it must be noted, is more than the zero net jobs that were added to the economy in August, according to the Labor Department.
Why has the Obama administration accomplished so little on the housing front, the one area where it has a clean shot at the policy dials? Essentially, because Geithner lives in a world in which all policy prescriptions begin with the assumption that giant banks must be kept happy or else economic damage will result, and he has the president's ear.
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