US Politics Mega-thread - Page 182

With the Supreme Court now at least considering a definitive statement in favor of gay marriage and support for marriage equality now practically a litmus test issue for Democratic politicians, Americans across the political spectrum are expressing surprise at how rapidly this once marginalized idea became something like a national consensus. Though equality remains law in fewer than a dozen states and no one is holding their breath to get gay married in Alabama or Arkansas, everybody gets that the debate is largely over. Even archconservative thought leader Rush Limbaugh has admitted it’s only a matter of time. But if you were surprised at how quickly marriage equality happened, get ready for another shock: pot’s going to be legal too. The same demographic and cultural changes that propelled marriage equality to majority status are already pushing support for legal pot to the same place.

TPM analyzed all available, nationwide polling data on the questions of full marijuana legalization and marriage equality for the past 18 years and found public opinion on the two issues has taken a nearly identical trajectory. In the mid-1990’s, average public support and opposition for both marriage equality and marijuana legalization was at fairly similar levels. In 1995, 25 percent of those polled supported marijuana legalization while 73 percent opposed it. One year later, 27 percent of people polled backed marriage equality while 68 percent were against it. Over the next decade and change support for both marriage equality and marijuana legalization grew to similar levels. Currently, an average of 50.6 percent of people polled this year support gay marriage and 42.6 percent oppose it. The most recent polling on marijuana legalization is from last year and shows average support at 48.5 percent and average opposition at 48 percent.

Obama administration pushes banks to make home loans to people with weaker credit

By Zachary A. Goldfarb, Published: April 2

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.

“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.

Administration officials say they are looking only to allay unnecessary hesi­ta­tion among banks and encourage safe lending to borrowers who have the financial wherewithal to pay.

“There’s always a tension that you have to take seriously between providing clarity and rules of the road and not giving any opportunity to restart the kind of irresponsible lending that we saw in the mid-2000s,” said a senior administration official who was not authorized to speak on the record.

The administration’s efforts come in the midst of a housing market that has been surging for the past year but that has been delivering most of the benefits to established homeowners with high credit scores or to investors who have been behind a significant number of new purchases.

“If you were going to tell people in low-income and moderate-income communities and communities of color there was a housing recovery, they would look at you as if you had two heads,” said John Taylor, president of the National Community Reinvestment Coalition, a nonprofit housing organization. “It is very difficult for people of low and moderate incomes to refinance or buy homes.”

Before the crisis, about 40 percent of home buyers were first-time purchasers. That’s down to 30 percent, according to the National Association of Realtors.

From 2007 through 2012, new-home purchases fell 30 percent for people with credit scores above 780 (out of 800), according to Federal Reserve Governor Elizabeth Duke. But they declined 90 percent for people with scores between 680 and 620 — historically a respectable range for a credit score.

“If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you’re leaving out of the market an entire population of creditworthy folks, which constrains demand and slows the recovery,” said Jim Parrott, who until January was the senior adviser on housing for the White House’s National Economic Council.

One reason, according to policymakers, is that as young people move out of their parents’ homes and start their own households, they will be forced to rent rather than buy, meaning less construction and housing activity. Given housing’s role in building up a family’s wealth, that could have long-lasting consequences.

“I think the ability of newly formed households, which are more likely to have lower incomes or weaker credit scores, to access the mortgage market will make a big difference in the shape of the recovery,” Duke said last month. “Economic improvement will cause household formation to increase, but if credit is hard to get, these will be rental rather than owner-occupied households.”

Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.

The FHA historically has been dedicated to making homeownership affordable for people of moderate means. Under FHA terms, a borrower can get a home loan with a credit score as low as 500 or a down payment as small as 3.5 percent. If borrowers with FHA loans default on their payments, taxpayers are on the line — a guarantee that should provide confidence to banks to lend.

But banks are largely rejecting the lower end of the scale, and the average credit score on FHA loans has stood at about 700. After years of intensifying investigations into wrongdoing in mortgage lending, banks are concerned that they will be held responsible if borrowers cannot pay. Under some circumstances, the FHA can retract its insurance or take other legal action to penalize banks when loans default.

“The financial risk of just one mistake has just become so high that lenders are playing it very, very safe, and many qualified borrowers are paying the price,” said David Stevens, Obama’s former FHA commissioner and now the chief executive of the Mortgage Bankers Association.

The FHA, in coordination with the White House, is working to develop new policies to make clear to banks that they will not lose their guarantees or face other legal action if loans that conform to the program’s standards later default. Officials hope the FHA’s actions will then spur Fannie and Freddie to do the same.

The effort requires sign-on by the Justice Department and the inspector general of Department of Housing and Urban Development, agencies that investigate wrongdoing in mortgage lending.

“We need to align as much as possible with IG and the DOJ moving forward,” FHA Commissioner Carol Galante said. The HUD inspector general and Justice Department declined to comment.

The effort to provide more certainty to banks is just one of several policies the administration is undertaking. The FHA is also urging lenders to take what officials call “compensating factors” into account and use more subjective judgment when deciding whether to make a loan — such as looking at a borrower’s overall savings.

“My view is that there are lots of creditworthy borrowers that are below 720 or 700 — all the way down the credit-score spectrum,” Galante said. “It’s important you look at the totality of that borrower’s ability to pay.”

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan...

“If you were going to tell people in low-income and moderate-income communities and communities of color there was a housing recovery, they would look at you as if you had two heads,” said John Taylor, president of the National Community Reinvestment Coalition, a nonprofit housing organization. “It is very difficult for people of low and moderate incomes to refinance or buy homes.” ...

One reason, according to policymakers, is that as young people move out of their parents’ homes and start their own households, they will be forced to rent rather than buy, meaning less construction and housing activity. Given housing’s role in building up a family’s wealth, that could have long-lasting consequences.

“I think the ability of newly formed households, which are more likely to have lower incomes or weaker credit scores, to access the mortgage market will make a big difference in the shape of the recovery,” Duke said last month. “Economic improvement will cause household formation to increase, but if credit is hard to get, these will be rental rather than owner-occupied households.”

On April 04 2013 02:40 farvacola wrote:
Definitely something to keep a close eye on, as that article makes it very difficult to ascertain precisely what sort of motivation the White House has in this. It all does sound vaguely stupid though, the house ownership fetish needs to be reeled in.

The FHA, in coordination with the White House, is working to develop new policies to make clear to banks that they will not lose their guarantees or face other legal action if loans that conform to the program’s standards later default. Officials hope the FHA’s actions will then spur Fannie and Freddie to do the same.

On April 04 2013 02:44 sam!zdat wrote:
here we go again

On April 04 2013 05:04 Gorsameth wrote:
zzzz the way to fix the housing problem is not to lend people more money. its to make sure the prices are lower. Dont fix the symptoms. fix the problem.

On April 04 2013 05:11 Praetorial wrote:


With due respect, government coercion wasn't the reason that the last housing crisis happened.

While true that the government told many banks to lend to high-risk citizens, you also have to look at two other factors that are much greater in magnitude.

1) The Gramm-Leach-Billey Act. Basically, this act, passed under Clinton's administration, removed all barriers from banks whose investors were insured by the Federal Depositor's Insurance Corporation. In other words, banks could invest in high-risk ventures while taking loans from the federal government to cover themselves in the case of the bank run. The people who put their money in a bank would be fine, but the taxpayers who had(and did) to fund such a bailout wouldn't be. It's worth noting that this act was authored by three Republican senators.

2) Shadow banking. There are a ton of financial intermediaries that take money and invest it similar to banks, but without a license. Now, these "banks" weren't affected by the "coercion" that the government was using to "force" banks into giving out higher-risk loans. And because of the nature of their operation, they created a gigantic amount of risk because their credit was linked directed to banks. What were the first body blows to the economy in 2008? Not the banks, as you'd have everyone believe, but Lehman Brothers and Bear Stearns, neither of which were "coerced" by the federal government in any way.

Government action didn't create the crisis, a lack of oversight in the financial sector did.

On April 04 2013 05:52 JonnyBNoHo wrote:
FDIC is funded by the banks, not general taxpayers. FDIC also only backs depositors below the statutory maximum.

I'm not sure what the negative impact (if any) of this act was. If you have some info here, please share.

The shadow banking system experienced a run largely because people in the repo market didn't trust the ratings on RMBS (residential morgage backed securities) anymore. So the fact that many RMBS were full of crummy mortgages is a direct cause (if not the cause) of the crisis.

I'll agree with you that government coercion wasn't the only reason so many bad mortgages were made. But it was a reason and one that probably shouldn't be repeated.

In October 2012, I criticised the academic paywall system, which requires that ordinary people pay exorbitant prices to access scholarly work. I predicted that this system would lead to a loss of funding for academic research:

"In the United States, granting agencies like the National Science Foundation have come under attack by politicians who believe they fund projects irrelevant to public life. But by denying the public access to their work, academics do not allow taxpayers to see where their money is spent. By refusing to engage a broader audience about their research, academics ensure that few will defend them when funding for that research is cut."

My prediction came true. On March 20, 2013, the US Senate passed the Coburn amendment, an initiative which prohibits the National Science Foundation from funding political science research that does not explicitly promote "national security or the economic interests of the United States".

As a result, the NSF - which currently funds 61 percent of American political science research - will retract nearly all its support. "It's going to be hard for big political science to continue," says John McIver, who ran NSF's Political Science Program in the mid-1990s. Topics the NSF funded in the past included political participation, voting patterns and public culture. What political scientists would have been wise to examine is the culture of academia itself.

The loss of NSF funding is a loss for American political science and for Americans. But it is understandable that most Americans do not recognise the significance of this loss. Academia rewards social scientists who prohibit the spread of knowledge more than those who share it. From paywalls to jargon to a tacit moratorium on social media, academics build careers through public disengagement. They should not be surprised when the public then fails to see the relevance of their work.

Attack on political science funding

Despite its pleas for fiscal prudence, Congress' attack on political science funding has little to do with money. The NSF Political Science Program costs $11m out of an annual NSF budget of $7.8bn, or less than 0.2 percent. Cutting it will hardly free up funds for the "next-generation robotic limbs" or "life-saving hurricane detection systems" that Senator Tom Coburn, the Republican who spearheaded the cuts, envisions replacing desultory political science rot.

What lies behind the attack on political science? Some have suggested that politicians are reluctant to become the objects of objective research. "Studies of Americans' attitudes toward the Senate filibuster hold little promise to save an American's life," protests Coburn, a senator who regularly uses the filibuster.

Others have noted the anti-intellectualism of the Republican Party and Congress' refusal to recognise work that does not produce immediate, positive change. (You know, like Congress does.) Supporters of the Coburn amendment argue that academic research is elitist and impractical. "After four years of desperately searching in vain for how my degree could make the world a better place, the lack of real-world impact convinced me to leave a PhD programme in political science," writes Atlantic writer Greg Ferenstein, in a plea to defund his discipline.

"The paywall sends a signal to the public that their interest in scholarship is unwelcome, even though their money may have helped pay for it."

Arguments over impact and relevance ignore academia's complicity in its own demise. The biggest problem for academics is not that their work lacks value. It is that the public's ability to determine the value of academic work is limited by academia itself.

In the aftermath of the Coburn amendment, political scientists took to the internet to translate NSF project descriptions from academese. "Do we really know what turns an impoverished young man into a criminal, a gang member, or a terrorist? Might we want to understand ways to head that off?" asks political scientist Seth Masket, deciphering an abstract which contained the words "neopsyhological" and "manualised". Masket noted that political scientists have done a poor job explaining their discipline to public officials, the media, or society in general.

He is right. But academics struggling to stay employed are reluctant to relinquish the unwieldy jargon that is the source of so much mockery and misery. Shunning disciplinary norms could cost them in publishing or finding a job. Furthermore, writing in a style decipherable to the public opens one up to public scrutiny. "Bad writing," argues political scientist Stephen Walt, is "a form of academic camouflage designed to shield the author from criticism."

But bad writing also shields the author from interest and support - a serious problem when the denial of funding rests on assertions of irrelevance. That is assuming, of course, that the author's works are accessible at all.

With the majority of academic literature hidden behind a paywall, there is no way for the public to determine whether claims of irrelevance are valid. Instead, they rely on slanted media coverage - "Feds pay $227,000 to study magazine photographs," crowed the Washington Times - and politicians' charges of elitism, which paywalls help validate. The paywall sends a signal to the public that their interest in scholarship is unwelcome, even though their money may have helped pay for it.

Exploiting stereotypes of academics

The week the Coburn amendment passed, I spoke at a workshop on Central Asian security issues in Washington, DC. The presenters were researchers; the audience largely policy officials. One of the goals of the workshop was to determine what risks Central Asia faces after NATO withdraws from Afghanistan in 2014.

This is a question of national security - a pragmatic question, the sort of which Senator Coburn approves. But what we found during the discussion is how heavily our knowledge of Central Asian relies on the in-depth, long-term studies of objective scholars. Academic analysis of Central Asia has shed light on Islamic practice, ethnic conflict and state repression - issues of complexity important to shaping policy, but best studied by trained social scientists without a political agenda. The work of academic researchers was often funded through government programmes - and now that the government has cut funding, knowledge of the region will decrease.

There is no doubt that defunding disciplines like political science means we will lose research of value. There is also no doubt the government will seize any opportunity it can to axe programmes it deems of little significance. What is in doubt is the willingness of academics to forestall budgetary cuts by allowing the public to see the value of their work.

When scholars and society are considered separate, it is politicians like Tom Coburn who benefit. Politicians are able to exploit stereotypes of academics because academia blocks access to its best line of defence: its research.

There is no excuse, in the digital age, for continuing to suppress ideas and insight behind jargon and paywalls. We cannot debate what is in the public interest if the public has no way to discover what interests them.

http://www.aljazeera.com/indepth/opinion/2013/04/20134265610113939.html

On April 04 2013 06:34 Souma wrote:
Opinion piece:

~snip attack on political science~

On April 04 2013 06:08 aksfjh wrote:

The sub-prime mortgages that qualified for the FHA programs weren't even a large part of the defaults though. To qualify for them, you had to give out information on income, leverage, etc., which made the loan rateable. The issue came from lenders that never got that information (or never checked it), which wouldn't have been able to qualify for the programs, and were improperly rated.

Now, this doesn't mean that those involved with the program weren't/aren't at greater risks of default, especially when times turn sour, but it's more of a multiplier of risk than a source of risk.

More than 30 percent of the U.S. Federal Housing Administration loans originated from 2007 through 2009 will be delinquent within five years and the agency’s data underestimate that risk, according to a study by the Federal Reserve Bank of New York and New York University.

On April 04 2013 06:42 JonnyBNoHo wrote:

No, the issue went well beyond liar loans and fraud. FHA loans (or otherwise) that had all the required documentation still held risk.


Link

And now the issue is whether or not the government should increase the amount of risk that the FHA and other players in the mortgage market take on.

And whether or not RMBS were rated 'properly' is a red herring - those that were properly rated were often wrong as well.

Now, this doesn't mean that those involved with the program weren't/aren't at greater risks of default, especially when times turn sour, but it's more of a multiplier of risk than a source of risk.