Promised Land (9781524763183)
Page 36
The problem was at its worst in states like Nevada and Arizona, two of the epicenters of the subprime-driven housing bubble. There, you could drive through entire subdivisions that looked like ghost towns, with block after block of cookie-cutter houses, many of them newly built but lifeless, properties developed but never sold, or sold and promptly foreclosed upon. Either way, they were empty, some with their windows boarded up. The few homes still occupied stood out like small oases, their postage-stamp lawns green and tended, cars parked in the driveways, lonely outposts against a backdrop of ravaged stillness. I remember talking with a homeowner in one of these developments during a campaign visit to Nevada. He was a sturdy, fortyish man in a white T-shirt who had turned off his lawn mower to shake my hand while a towheaded little boy zipped around behind him on a red tricycle. He was luckier than many of his neighbors, he told me: He’d had enough seniority at the factory where he worked to avoid the first wave of layoffs, and his wife’s nursing job seemed relatively secure. Still, the house they’d paid $400,000 to purchase at the height of the bubble was now worth half that amount. They had quietly debated whether their best move was to default on their mortgage and walk away. Toward the end of our conversation, the man looked back at his son.
“I remember my dad talking about the American Dream when I was a kid,” he said. “How the most important thing was to work hard. Buy a house. Raise a family. Do things right. What happened to that? When did that become just a load of…?” He trailed off, looking pained before wiping the sweat from his face and restarting his mower.
The question was what my administration could do to help a man like that. He hadn’t lost his home, but he’d lost faith in the shared enterprise of our country, its larger ideal.
Affordable-housing advocates and some progressives in Congress were pushing a large-scale government program to not only reduce monthly mortgage payments for people at risk of losing their homes but actually forgive a portion of their outstanding balance. At first blush the idea had obvious appeal: a “bailout for Main Street, not Wall Street,” as proponents suggested. But the sheer scale of lost home equity across the country made such a principal-reduction program cost-prohibitive; our team calculated that even something the size of a second TARP—a political impossibility—would have a limited effect when spread out across the $20 trillion U.S. real estate market.
We settled on launching two more modest programs, both of which I detailed that day in Mesa: the Home Affordable Modification Program (HAMP), designed to reduce the monthly mortgage payments of eligible homeowners to no more than 31 percent of their income, and the Home Affordable Refinance Program (HARP), which would help borrowers refinance their mortgage at lower rates even if their homes were underwater. By design, not everyone would be assisted under these programs. They wouldn’t help those who, through subprime loans, had bought way more home than their income could support. Nor would they be open to those who had bought real estate as a debt-financed investment, thinking they could flip the property for a profit. Instead, the goal was to target several million families teetering on the edge: those who lived in their homes and had made what had seemed at the time like a responsible purchase, but now needed relief to get them through.
Implementing even these limited programs posed all kinds of logistical hurdles. For example, while it was in the interest of mortgage lenders to keep families in their homes (in an already depressed market, foreclosed homes sold at fire-sale prices, resulting in big losses for the lender), mortgages were no longer held by a discrete set of banks that we could pressure into participating. Instead, they’d been securitized, sold in bits and pieces to various investors around the world. The homeowner never dealt directly with these anonymous lenders, instead sending mortgage payments to a servicing company that operated as little more than a glorified bill collector. Without the legal authority to force these servicing companies to do anything, the best we could do was offer incentives for them to offer homeowners a break. We also had to convince the servicing companies to process millions of applications to determine who was or wasn’t eligible for a mortgage modification or refinancing, something they were ill-equipped to do.
And just who, exactly, was deserving of government assistance? This question would insinuate itself into just about every policy debate we had throughout the economic crisis. After all, as bad as things were in 2009, the vast majority of American homeowners were still figuring out a way, by hook or by crook, to stay current on their mortgages. To do so, many had cut back on eating out, canceled their cable TV, or spent down savings intended for their retirement or for their children’s college expenses.
Was it fair to devote the hard-earned tax dollars of those Americans to reducing the mortgage payments of a neighbor who’d fallen behind? What if the neighbor had bought a bigger house than they could really afford? What if they had opted for a cheaper but riskier type of mortgage? Did it matter if the neighbor had been duped by a mortgage broker into thinking they were doing the right thing? What if the neighbor had taken their kids to Disneyland the year before rather than putting that money into a rainy-day fund—did that make them less worthy of help? Or what if they had fallen behind on their payments not because they’d put in a new swimming pool or taken a vacation but because they’d lost their job, or because a family member had gotten sick and their employer didn’t offer health insurance, or because they just happened to live in the wrong state—how did that change the moral calculus?
For policy makers trying to halt a crisis, none of these questions mattered—at least not in the short term. If your next-door neighbor’s house is on fire, you don’t want the fire department dispatcher asking whether it was caused by lightning or by someone smoking in bed before agreeing to send a fire truck; you just want the fire put out before it reaches your house. Mass foreclosures were the equivalent of a five-alarm fire that was destroying everyone’s home values and taking the economy down with it. And from our perspective, at least, we were the fire department.
Still, questions of fairness were very much on the minds of the public. I wasn’t surprised when experts reacted critically to our housing package, suggesting that the $75 billion price tag was too small to address the scale of the problem, or when housing advocates blasted us in the press for not including a means to reduce the overall principal. What my team and I didn’t anticipate was the critique that ended up getting the most attention that day in Mesa, maybe because it came from such an unlikely source. The day after the rally, Gibbs mentioned that a CNBC business commentator named Rick Santelli had launched a lengthy on-air rant about our housing plan. Gibbs, whose radar on these things was rarely off, seemed concerned.
“It’s getting a lot of play,” he said. “And the press pool’s asking me about it. You might want to check it out.”
That night I watched the video clip on my laptop. I was familiar with Santelli; he seemed no different from most of the talking heads populating the cable business shows, delivering a mix of market gossip and yesterday’s news with the glib conviction of a late-night infomercial host. In this instance, he’d been broadcasting live from the floor of the Chicago Mercantile Exchange, charged up with theatrical outrage and surrounded by traders who were smugly cheering from their desks as he regurgitated a bunch of standard Republican talking points, including the (incorrect) claim that we’d be paying off the mortgages of irresponsible spendthrifts and deadbeats—“losers,” Santelli called them—who had gotten in over their heads. “The government is promoting bad behavior!” he shouted. “How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills?”
Santelli went on to declare that “our Founding Fathers, people like Benjamin Franklin and Jefferson, what we’re doing in this country now is making them roll over in their graves.” Somewhere in mid-monologue, he suggested “a Chicago tea party in July” to put a stop to big-government giveaways.
In other words, it was bullshit. Santelli knew it. The CNBC anchors bantering with him knew it. And yet it was clear that the traders, at least, fully embraced what Santelli was peddling. They didn’t appear chastened by the fact that the game they played had been rigged up and down the line, if not by them then by their employers, the real high rollers in wood-paneled boardrooms. They didn’t seem concerned by the fact that for every “loser” who had bought more house than he could afford, there were twenty folks who had lived within their means but were now suffering the fallout from Wall Street’s bad bets.
No, these traders were genuinely aggrieved, convinced that they were about to get screwed at the hands of the government. They thought they were the victims. One had even leaned into Santelli’s mic and declared our housing program a “moral hazard”—deploying an economic term that had entered the popular lexicon, used to explain how policies that shielded banks from their mounting losses might end up encouraging even more financial recklessness in the future. Only now the same term was being wielded to argue against help for families who, through no fault of their own, were about to lose their homes.
I clicked the video feed off, feeling irritated. It was a familiar trick, I thought to myself, the kind of rhetorical sleight of hand that had become a staple of conservative pundits everywhere, whatever the issue: taking language once used by the disadvantaged to highlight a societal ill and turning it on its ear. The problem is no longer discrimination against people of color, the argument goes; it’s “reverse racism,” with minorities “playing the race card” to get an unfair advantage. The problem isn’t sexual harassment in the workplace; it’s humorless “feminazis” beating men over the head with their political correctness. The problem is not bankers using the market as their personal casino, or corporations suppressing wages by busting unions and offshoring jobs. It’s the lazy and shiftless, along with their liberal Washington allies, intent on mooching off the economy’s real “makers and the doers.”
Such arguments had nothing to do with facts. They were impervious to analysis. They went deeper, into the realm of myth, redefining what was fair, reassigning victimhood, conferring on people like those traders in Chicago that most precious of gifts: the conviction of innocence, as well as the righteous indignation that comes with it.
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I WOULD OFTEN think back to that Santelli clip, which foreshadowed so many of the political battles I’d face during my presidency. For there was at least one sideways truth in what he’d said: Our demands on the government had changed over the past two centuries, since the time the Founders had chartered it. Beyond the fundamentals of repelling enemies and conquering territory, enforcing property rights and policing issues that property-holding white men deemed necessary to maintain order, our early democracy had largely left each of us to our own devices. Then a bloody war was fought to decide whether property rights extended to treating Blacks as chattel. Movements were launched by workers, farmers, and women who had experienced firsthand how one man’s liberty too often involved their own subjugation. A depression came, and people learned that being left to your own devices could mean penury and shame.
Which is how the United States and other advanced democracies came to create the modern social contract. As our society grew more complex, more and more of the government’s function took the form of social insurance, with each of us chipping in through our tax dollars to protect ourselves collectively—for disaster relief if our house was destroyed in a hurricane; unemployment insurance if we lost a job; Social Security and Medicare to lessen the indignities of old age; reliable electricity and phone service for those who lived in rural areas where utility companies wouldn’t otherwise make a profit; public schools and universities to make education more egalitarian.
It worked, more or less. In the span of a generation and for a majority of Americans, life got better, safer, more prosperous, and more just. A broad middle class flourished. The rich remained rich, if maybe not quite as rich as they would have liked, and the poor were fewer in number, and not as poor as they’d otherwise have been. And if we sometimes debated whether taxes were too high or certain regulations were discouraging innovation, whether the “nanny state” was sapping individual initiative or this or that program was wasteful, we generally understood the advantages of a society that at least tried to offer a fair shake to everyone and built a floor beneath which nobody could sink.
Maintaining this social compact, though, required trust. It required that we see ourselves as bound together, if not as a family then at least as a community, each member worthy of concern and able to make claims on the whole. It required us to believe that whatever actions the government might take to help those in need were available to you and people like you; that nobody was gaming the system and that the misfortunes or stumbles or circumstances that caused others to suffer were ones to which you at some point in your life might fall prey.
Over the years, that trust proved difficult to sustain. In particular, the fault line of race strained it mightily. Accepting that African Americans and other minority groups might need extra help from the government—that their specific hardships could be traced to a brutal history of discrimination rather than immutable characteristics or individual choices—required a level of empathy, of fellow feeling, that many white voters found difficult to muster. Historically, programs designed to help racial minorities, from “forty acres and a mule” to affirmative action, were met with open hostility. Even universal programs that enjoyed broad support—like public education or public sector employment—had a funny way of becoming controversial once Black and brown people were included as beneficiaries.
And harder economic times strained civic trust. As the U.S. growth rate started to slow in the 1970s—as incomes then stagnated and good jobs declined for those without a college degree, as parents started worrying about their kids doing at least as well as they had done—the scope of people’s concerns narrowed. We became more sensitive to the possibility that someone else was getting something we weren’t and more receptive to the notion that the government couldn’t be trusted to be fair.
Promoting that story—a story that fed not trust but resentment—had come to define the modern Republican Party. With varying degrees of subtlety and varying degrees of success, GOP candidates adopted it as their central theme, whether they were running for president or trying to get elected to the local school board. It became the template for Fox News and conservative radio, the foundational text for every think tank and PAC the Koch Brothers financed: The government was taking money, jobs, college slots, and status away from hardworking, deserving people like us and handing it all to people like them—those who didn’t share our values, who didn’t work as hard as we did, the kind of people whose problems were of their own making.
The intensity of these convictions put Democrats on the defensive, making leaders less bold about proposing new initiatives, limiting the boundaries of political debate. A deep and suffocating cynicism took hold. Indeed, it became axiomatic among political consultants of both parties that restoring trust in the government or in any of our major institutions was a lost cause, and that the battle between Democrats and Republicans each election cycle now came down to whether America’s squeezed middle class was more likely to identify the wealthy and powerful or the poor and minorities as the reason they weren’t doing better.
I didn’t want to believe that this
was all our politics had to offer. I hadn’t run simply to fan anger and allocate blame. I had run to rebuild the American people’s trust—not just in the government but in one another. If we trusted one another, democracy worked. If we trusted one another, the social compact held, and we could solve big problems like wage stagnation and declining retirement security. But how could we even begin?
The economic crisis had tipped recent elections in the Democrats’ favor. But far from restoring any sense of common purpose or faith in the government’s capacity to do good, the crisis had also made people more angry, more fearful, more convinced that the fix was in. What Santelli understood, what McConnell and Boehner understood, was how easily that anger could be channeled, how useful fear could be in advancing their cause.
The forces they represented might have lost the recent battle at the polls—but the larger war, that clash of worldviews, values, and narratives, was the one they would still try to win.
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IF ALL THIS seems obvious to me now, it wasn’t at the time. My team and I were too busy. Passing the Recovery Act and rolling out our housing plan may have been necessary elements in ending the crisis. They weren’t close to being sufficient. In particular, the global financial system was still broken—and the man I was relying on to fix it was not off to a promising start.
Tim Geithner’s problems had begun weeks earlier, during the process to get him confirmed as Treasury secretary. Historically, Senate confirmation of cabinet appointments was a relatively routine affair, with senators from both parties operating on the presumption that presidents were entitled to choose their own teams—even if they considered the men and women the president selected to be scoundrels and fools. But in recent years, the Senate’s constitutional mandate to “advise and consent” had become one more weapon in the endless cycle of partisan trench warfare. Senate staffers of the opposing party now scoured the records of nominees, looking for any youthful indiscretion or damaging quote that could then be raised in a hearing or used to make news. The nominees’ personal lives became the subject of endless and intrusive public questioning. The point of the exercise was not necessarily to torpedo the appointment—eventually most nominees got confirmed—but to distract and politically embarrass the administration. The hazing quality of the proceedings had another consequence: With increasing frequency, highly qualified candidates for top federal jobs would cite the confirmation ordeal—what it might do to their reputations, how it might affect their families—as a reason to decline a high-profile post.