Saturday, October 1, 2016

How to “Make America Great Again” or “Stronger Together”

By DeLon M. Stradford and Eric Stradford, U.S. Marine Corps, Retired

The Poverty Center is tapping into Big Data, learning more about the
housing crisis and its impact on American children.
AMWS-AT-WORK  October 1, 2016, Cleveland, OH –  Hillary Clinton’s skillful channeling of Muhammed Ali’s rope-a-dope tactics may have staggered a sniffling opponent.  However, her failure to land the knock-out punch left just enough doubt in Donald Trump’s mind that he had lost every round in the first of three presidential sparring contests. 
Well over 80 million people tuned in for the face off, setting a new record in the sixty-year history of televised presidential debates.  Among them, 62% are still “with her,” standing by her man, to make America “Stronger Together.”  Contrary to populist perception, scientific polling suggests that only 22% are still in that “basket of deplorables” with him to “Make America Great Again.”  According to National Public Radio, actual scientific polls have shown that Clinton was the clear winner in Monday night’s televised debate.  
The presidential hopefuls’ quest to occupy public housing at 1600 Pennsylvania Avenue rent-free has some beleaguered homeowners wondering if the two-party system has run its course.  This is just one reason why voters need to see all candidates’ income tax returns.  
The current residents at The White House, an upwardly mobile African American family, will be headed back to the block with a handful of explanations as to why simple stuff like the mortgage crisis has yet to be resolved for everyday Americans. 
One could claim that as the first African American president, Barack Obama did all he could to restore America’s economy.  He counseled his predecessor on the Wall Street Bail Out, super-glued Freddie Mac’s and Fannie Mae’s brokenness, and got the auto industry back up and running--ALL without urgently needed appropriations bills from Congress. 
But, a decision not to investigate, prosecute and imprison former Vice President Dick Cheyney, select cabinet members and advisors from a previous administration may prove to be the one executive action defining two otherwise productive terms.  Both the Bush and the Obama Administrations knew about Cleveland, Ohio’s housing problem. 
The American Mentor Wire Service, a program of Youth Achievers USA Institute, started observing economic trends and behaviors as far back as 1998.  That was the year young Americans called for a 10-year Million Youth Movement.  They met in Atlanta, GA and set goals around their individual and collective visions for the future.  Among the less than a million committed souls were beneficiaries of an American Civil Rights era.  They were banking on an inheritance that somehow resulted instead in a compromise on a long-overdue promissory note.
By 2008, the hope of disadvantaged Americans owning their first homes had faded in the cloud of a seven-year mortgage crisis.  Two government-sponsored enterprises (GSE), Fannie Mae and Freddie Mac, suffered large losses and were seized by the federal government the summer of 2008 as two-party presidential campaigning shifted into business as usual.  President Bush attempted to ease concerns with an observation that “the economy is fine.”
Earlier, in order to meet federally mandated goals to increase homeownership, Fannie Mae and Freddie Mac had issued debt to fund purchases of subprime mortgage-backed securities, which later fell in value.  In addition, the two government enterprises suffered losses on failing prime mortgages, which they had earlier bought, insured, and then bundled into prime mortgage-backed securities that were sold to investors.
Historically, potential homebuyers found it difficult to obtain mortgages if they had below average credit histories, provided small down payments or sought high-payment loans.   So, as some wealthy Americans benefitted from the G.W. Bush era tax cuts, few of them ever bothered to follow through on their obligations through the New Market Tax Credits Act.  
Not everybody is an economist, and most economists you meet are more concerned with their next paycheck than your bottom line.   But, in a nutshell, the September 6, 2008 conservatorship to balance Freddie and Fannie’s books cost taxpayers bigtime.  Freddie and Fannie are "independent" corporations and not federal agencies.  Their combined balance sheet obligations were just over $5 trillion, a significant amount when compared to the $9.5 trillion of officially reported United States public debt at the time of the Freddie-Fannie takeover.
It appears that none ($0) of the U.S. Treasury’s infusion of capital for Freddie and Fannie helped folks that could not qualify for Freddie and Fannie’s help in the first place.  HARP seemed to be a necessary first step toward doing the right thing, but imagine being told you don’t qualify for a mere $100,000.00 in relief after Freddie and Fannie denied you a government-backed loan.  Then, go back and review half the political promises made to get you a job or help you start a business.  Factor in some seemingly unrelated issues such as implicit biases and racial anxiety.  Finally, you’ll want to multiply your own undervaluation by 240 years of economic compromise.   
This is just one formula, to begin quantifying a debt due to historically disadvantaged Americans.   Just imagine what might have been achieved had the U.S. Congress approved the President’s budgets over the last eight years. 
Several government agencies under the Obama Administration took steps to increase liquidity within Fannie Mae and Freddie Mac. 
·      Federal Reserve purchases of $23 billion in GSE debt (out of a potential $100 billion) and $53 billion in GSE-held mortgage backed securities (out of a potential $500 billion).
·      Federal Reserve purchases of $24 billion in GSE debt.
·      Treasury Department purchases of $14 billion in GSE stock (out of a potential $200 billion).
·      Treasury Department purchases of $71 billion in mortgage backed securities.
·      Federal Reserve extension of primary credit rate for loans to the GSEs
Keep in mind that government-sponsored enterprise (GSE) is a financial services corporation created by the United States Congress. Their intended function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent, and to reduce the risk to investors and other suppliers of capital.
Meanwhile, way too many Americans are still struggling with upside down mortgages, limited job opportunities and almost no understanding of their unique small business needs.  There has always been some logic in the belief that poor people can stop being poor as rich people are willing to become even richer at a slower pace.   But, more than 4 million Americans don’t own homes, they own mortgages! 
According to one real estate source, American “homeowners” owe at least 20% more than their homes are worth, totaling $579 billion of so-called negative equity.  The next President of the United States will need to forgive some citizens of that debt instead of compounding the issue with more empty promises and ineffective programs.  Too many families are in serious financial crisis, while our political candidates, members of Congress, and other elected or appointed officials mimic episodes of “Scandal,” “Survivor,” “Empire,” or even “The Apprentice.”   It’s time to stop stalling critical funding, projects, legislation and appointments.  And, it’s past time for Congress to approve a budget.