- The Washington Times - Sunday, September 28, 2008

ANALYSIS/OPINION:

Before I could finish the question, Franklin D. Raines, former CEO and president of Fannie Mae, asked me, “You mean, how do I feel about being the ‘Willie Horton’ of this campaign season?”

Well, since he put it that way, what is the answer?

“They should be ashamed,” Mr. Raines said, and left it there.

“They” could be the handlers for Arizona Sen. John McCain, the Republican presidential nominee, whose campaign ads attempted to link Mr. Raines to rival Illinois Sen. Barack Obama through superimposed portrait photos. Both Mr. Raines and the Obama team deny he is advising the Democrat’s campaign.

“They” could be members of the Bush administration, who he said failed to heed his warnings about the need for more regulation of predatory lending practices of private lenders and speculators, and of the impending housing crisis, but now lay primary blame on the quasi-independent Fannie Mae and Freddie Mac mortgage companies.

Mr. Raines left the company four years ago under a cloud of suspicion about accounting irregularities by company executives that he denied but for which he was later fined. He contends, however, that he exercised “some discipline” and started pulling his company out of the subprime market while he was in charge.

“They” also could be critics and commentators, primarily conservative and Republican, who argued that Mr. Raines and his former boss, Bill Clinton, precipitated the current financial crisis with their policy to extend the dream of homeownership to larger numbers of Americans. Mr. Raines said speculative lenders were not subject to federal community investment regulations.

And just in case you don’t know who Horton is, go back to the 1988 campaign scare tactics employed by supporters of the first President Bush to defeat Democrat Michael Dukakis, then governor of Massachusetts. Not a pretty picture. Horton’s mug shot was shown so many times that he became a household name, synonymous with crime and liberal incarceration practices.

Deregulation and expansion, or greed coupled with ignorance?

As we all know by now, there is plenty of bipartisan blame to toss around when it comes to understanding the country’s current financial crisis and the passage of complex congressional bailout proposals. They are being played like the intractable Washington Redskins’ versus Dallas Cowboys’ football rivalry today about which few people know the genesis.

Rep. Emanuel Cleaver II, Missouri Democrat and a member of the House Financial Services subcommittee on housing and community opportunity, joined Mr. Raines in trying to explain the genesis, the blame and the solutions to the housing crisis to worried folks flowing out of a packed meeting room at the Walter E. Washington Convention Center on Friday afternoon.

“This is not the homeowners’ fault,” Mr. Raines said.

“The [bailout] package deals with Wall Street, but we need something for people who live on Martin Luther King Boulevard,” Mr. Cleaver said.

Speaking before the generally welcoming audience, Mr. Raines was the moderator of a session billed as “Financial Literacy and The Housing Crisis: How Did I[t] and How Will It Continue to Affect African-Americans and the Economy,” as part of the Congressional Black Caucus’ Annual Legislative Weekend agenda.

No matter what brought us to this breaking point, both men stressed the notion that the only long-term “rescue plan” to fix the economic crisis is to fix the housing crisis, primarily through “workouts” designed to save homeowners from foreclosures, which have proven to be bad for everybody.

It was Mr. Cleaver’s contention that the media’s use of the term “bailout” instead of “rescue” precipitated the largest number of calls to Congress from voters across the political spectrum.

Mr. Raines and Mr. Cleaver said that in the $700 billion “rescue” the government should set aside at least $10 billion to assist distressed homeowners in renegotiating their mortgages with current lenders, who really don’t want costly foreclosures. Currently, workouts are voluntary.

“Contrary to belief in the African-American community, the bank does not want your house,” Mr. Raines said. There is a need for deals “that keep people in their homes.”

Mr. Cleaver said he is reluctant to vote for any bailout measure that does not include relief for homeowners.

“There is nothing much in this for homeowners. It’s just not there,” he said.

Like Mr. Obama, Mr. Cleaver also wants an adjustment to the bankruptcy laws whereby judges could reset mortgages on primary residences. Currently, lending agreements can only be adjusted on vacation property or luxury items such as boats. Consequently Mrs. Jones, with one home, is out of luck, but someone with “maybe seven homes,” an obvious reference to Mr. McCain, could be helped.

A number of “ordinary citizens,” like the fictitious Mrs. Jones, were in the audience and asked pointed questions about why they should bail out Wall Street and how the crisis will affect them when they pay their mortgages on time.

Mr. Cleaver explained that vacant foreclosed properties, which the government or banks cannot unload, create blight and unsafe havens like crack houses, which drive down the market value of neighborhoods and entire communities.

At one point when someone asked how the $700 billion bailout figure was calculated, Mr. Raines reached up as if to pluck an imaginary plum off a tree, which provoked laughter.

This group is also of the view that millions of homeowners, especially minorities, were the victims of greedy and unscrupulous lenders as well as real estate agents and brokers motivated by commissions tied to selling risky products they knew were bad for consumers who were not financially savvy. A number of participants spoke about people being pressured to take on debt and sign documents they knew little about. So, they should receive the same help as Wall Street investors.

Some of these practices are continuing even today, judging from stories I’ve heard. Again, we need to make financial literacy mandatory in the nation’s schools so we can hold all accountable.

Mr. Raines said he is skeptical about the Treasury Department’s foray into the complex mortgage industry. He also voiced concern about the government’s Band-Aid method of financing a different bailout every weekend.

The tanking housing market is the problem and restoring housing value is the solution.

“The people who made their money are gone,” said Mr. Raines, who is among “them” who ought to know.

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