FHFA

DeMarco Speaks! (With Closed Captioning For the Mortgage-Impaired)

Richard Eskow — Wed, 11 Apr 2012 01:10:11 -0400

Edward DeMarco is the beleaguered bureaucrat in charge of an agency called the Federal Housing Finance Agency. And because the FHFA is now managing Fannie Mae and Freddie Mac, DeMarco's in charge of most American mortgages. He's been the target of resignation demands for weeks. Everyone from Tim Geithner on down - and therefore presumably President Obama, too - has singled out DeMarco as the one person standing in the way of relief for millions of American homeowners.

DeMarco's still an unelected ideologue with too much power, and he still needs to go. But today, after remaining silent and refusing to share some of his technical information with members of a Congressional oversight committee, the previously Garbo-esque Ed DeMarco finally spoke up today. His speech at the Brookings Institution was technical in nature, but to anyone with the right political or emotional closed-captioning device the message was loud and clear: Don't rush me, Mr. President - and find yourself another fall guy.

And to anyone who's underwater on a mortgage the message was even clearer: You're not getting much help from me.

Using material from his prepared text, we now present the remarks of Edward DeMarco - with closed captioning provided for the mortgage impaired:

WHAT DEMARCO SAID:

"I will not be announcing any conclusions today - our work is not yet complete - "

WHAT HE MEANT (closed captioning):

What's the hurry? It's only been three years, eleven million underwater mortgages, and lost housing value that exceeds seven trillion dollars. We'll get around to it eventually. I promise.

WHAT DEMARCO SAID:

" ...but in view of the state of the public policy debate on this subject ..."

WHAT HE MEANT:

The public pressure is finally getting to me ... and maybe even to my political patron on Capitol Hill, Sen. Richard Shelby.

(Shelby's the Republican from Alabama who has abused Senatorial privilege for three years by refusing to allow a hearing on Obama's nominee for DeMarco's position as head of the FHFA. That's left DeMarco in place as Acting Director for quite a while now.)

WHAT DEMARCO SAID:

" ... , I am pleased to have this venue to enhance the public understanding of this difficult question and to explain how FHFA has approached the matter."

WHAT HE MEANT:

I'd rather sound like i'm glad for the chance to educate the public than like someone who's been getting heat for weeks now - heat that's finally getting to me.

WHAT DEMARCO SAID:

"I set the context by reviewing FHFA's legal responsibilities as conservator."

WHAT HE MEANT:

I took over Fannie and Freddie after Republicans and so-called "centrist" Democrats privatized them - an act which destroyed them when their greedy executives behaved like sheep and followed the irresponsible example of Wall Street's banks.

And I'm continuing to interpret my role as strictly one of restoring them to fiscal balance, not as that of someone who as a government official must also ensure they succeed in the mission for which they were created - which, as one of their websites tells us, is to "Meet the needs of the mortgage market by making homeownership and rental housing more affordable; Reduce the number of foreclosures; Helping families keep their homes."

That part doesn't interest me.

WHAT DEMARCO SAID:

"Clearly, many households got over-extended financially. Some accumulated debts they couldn't afford when hours or wages were cut or jobs were lost. Others withdrew equity from their homes as house prices soared. Others bought houses at the peak of the market, often with little money down, perhaps in the belief house prices would continue to climb ..."

WHAT HE MEANT:

... and they got what was coming to them. Bailing out these irresponsible so-and-so's would reward the undeserving - although it wasn't unreasonable to bail out the banks that persuaded them to do all the things I described, and which inflated the values of their homes and used deceptive booking to persuade many of them to do it.

WHAT DEMARCO SAID:

"Yet there are other Americans who did not do these things. There are families that did not move up to that larger house because they weren't comfortable taking the risk. Perhaps they had to save for college or retirement, and did not want to invest that much in housing."

WHAT HE MEANT:

So why rescue the gamblers and freeloaders? Of course I don't have any data to prove that struggling homeowners did anything wrong, but I have something better: ideology. With ideology you don't need proof.

WHAT DEMARCO SAID:

"And there are people working multiple jobs, or cutting back on the family budget in many ways, to continue making their mortgage payments through these tough times. Many of these families are themselves underwater on their mortgage, even though they may have made a sizeable down payment."

WHAT HE MEANT:

Your heroes, the very Administration that's demonizing me, only seems to be proposing that we help people who have actually gone delinquent on their mortgages. But that's not fair to all the underwater homeowners who haven't gone delinquent.

(He's got a point: From recent remarks on C-SPAN it's clear that HUD Secretary Shaun Donovan is focused only on reducing principal for delinquent borrowers and not anyone else. That's an approach which helps irresponsible banks but leaves the vast majority of duped homeowners high and dry - even when homeowners were duped into taking out loans that were too big by a bank that used dishonest appraisers. That's not fair - and suggests greater concern for bankers than for homeowners.)

WHAT DEMARCO SAID:

"Indeed, the majority of those most hurt by this housing crisis did nothing wrong - they were playing by the rules but they have been the victims of timing or circumstance or poor judgment."

WHAT HE MEANT:

I'm an ideologue, but I'm not a complete dick.

WHAT DEMARCO SAID:

"The first modification program the Enterprises use to evaluate a borrower is the Administration's Home Affordable Modification Program, or HAMP."

WHAT HE MEANT:

You know HAMP, don't you? That wildly unsuccessful program, the one that's helped banks and shafted a lot of homeowners? The one that's run by Tim Geithner, the guy who says I'm the problem?

If Geithner and the Administration are doing such a great job, then you should be pleased to know we're going right along with them. But if we're eff-ups, then they're eff-ups too.

WHAT DEMARCO SAID:

"While mortgages owned by other financial institutions or held in private label mortgage-backed securities have a much higher delinquency rate than those owned or guaranteed by the Enterprises, the Enterprises have been leading national foreclosure prevention efforts."

WHAT HE MEANT:

We're a government enterprise, and we're running circles around the private sector when it comes to meeting our goals. There are some functions that government performs better. (Wait! That came out the wrong way. I didn't mean to say that!)

WHAT DEMARCO SAID:

"Fannie Mae and Freddie Mac own or guarantee 60 percent of mortgages outstanding but they account for only 29 percent of seriously delinquent loans ... "

WHAT HE MEANT:

And your pals in the White House aren't exactly sweating the banks over this stuff, are they? Just poor old Ed.

WHAT DEMARCO SAID:

"Foreclosure prevention efforts are not the only form of assistance to borrowers. For borrowers who are current on their loan and not in imminent default, FHFA worked with Treasury and the Enterprises to develop the Home Affordable Refinance Program (HARP)."

WHAT HE MEANT:

Like I was saying, Timmy Geithner's not carrying his weight around here. Why don't you liberals go sweat Timmy for a while and give me a break?

WHAT DEMARCO SAID:

"In the original HAMP, principal forgiveness has always been permitted, but was rarely used."

WHAT HE MEANT:

That's Geithner. G-E-I-T-H ...

_______________

DeMarco then provides some reports and statistics. He also suggests that their previous attempts to analyze the problem were inadequate and offers a glimpse of their new corrective methodology - methodology which still looks to me like it will understate the problem (e.g. he says they'll lower FICO scores for modeling purposes from what they were at the time the loan was issued - but only by 100 points, which doesn't seem like nearly enough to reflect the reduced circumstances of many underwater and struggling homeowners).

DeMarco continued to insist that his primary, if not only, responsibility is to cut Fannie and Freddie's losses. But that position was undercut by the fact that he acknowledged that relieving principal as the Administration has requested would save his enterprises $1.7 billion. Yet he says he's still studying the issue.

DeMarco's right about one thing: it's wrong to step in only when a loan is delinquent. Personally, I agree with Stephen Lerner: All eleven million underwater homeowners should be helped. That's been my position for a while now.

There may be as strong an economic case for helping them as there was for helping Wall Street - and morally the case is much, much stronger. On a practical note, not helping them creates the threat of increased delinquency that DeMarco says he's worried about - although he would probably not endorse this solution.

Sadly, the Administration doesn't appear to endorse it either. Until they do there will always be a structural flaw with anything they propose - a flaw which DeMarco has found and will probably continue to press them about.

One other point: Fannie and Freddie, and therefore the taxpayer, don't own all of these loans. They own some, and they guarantee others with taxpayer money. And every solution discussed so far uses taxpayer money to rescue banks from the fiscal consequences of their own bad behavior. That's a pattern that needs to change.

DeMarco wound up his remarks with these words (we now resume our closed captioning):

WHAT DEMARCO SAID:

"FHFA remains committed to working with the Administration and Congress on these difficult questions, recognizing our shared objective of preventing avoidable foreclosures, minimizing taxpayer losses, and bringing a greater measure of stability to housing markets across the country."

WHAT HE MEANT:

Asking banks to take responsibility for their actions in the mortgage market? That's not on my to-do list - and it doesn't seem to have much of a place on the Administration's, either.

WHAT DEMARCO SAID:

"Thank you for inviting me here today."

WHAT HE MEANT:

It sure beats talking to that Cummings guy. Now will you people please go bother Geithner for a while?

The 28 Billion Dollar Man: Is Sen. Shelby The Most Fiscally Irresponsible Politician Ever?

Richard Eskow — Thu, 01 Mar 2012 23:29:28 -0500

Republicans love to say that nothing's more important cutting the Federal deficit. So why is Sen. Richard Shelby wasting $28 billion of taxpayer money? Shelby's used parliamentary tricks to put more than half of the nation's mortgages under the rule of an unelected official who answers to no one - except apparently Richard Shelby - whose wasting money like it's going out of style.

Is Richard Shelby a closet Deficit Lover? In Washington that's called The Love That Dare Not Speaks Its Name.

But the real answer's much simpler. Richard Shelby is losing tens of billions of dollars, hurting millions of middle-class homeowners, and stalling our economy recovery for one reason: to take the White House away from the Democrats.

Shelby's following the path laid out by Senate Majority Leader Mitch McConnell, who said the number one priority of GOP Senators is to make Barack Obama a "one-term President" - not to serve the nation.

If you want to create jobs or treat the sick, Sen. Shelby and his fellow Republicans will insist that we can't afford it. But there aren't enough zeroes on this page to count the money they'll waste for partisan gain.

Edward DeMarco: The Man Shelby Made King

George W. Bush brought a far-right ideologue named Edward DeMarco into the Federal Housing Finance Agency, which controls Fannie Mae and Freddie Mac and therefore has power over more than half the mortgages in the country. Now DeMarco's Acting Director of the FHFA, and where those mortgages are concerned he's king.

Three years after becoming President, Barack Obama can't get his own appointee into the job - because of Richard Shelby. That means DeMarco gets to stay on indefinitely.

Edward DeMarco misled Congress and the public by claiming that lowering principal on underwater mortgages would cost $100 billion. DeMarco's own staff produced a report showing that a principal reduction program would actually save taxpayers $28 billion. But DeMarco didn't tell Congress about that report.

An FHFA employee testified before Congress that there was a good pilot program designed to do exactly that. DeMarco didn't tell Congress about that either. The employee testified that the DeMarco team killed the program, as a letter by two Democratic representatives explains, for "ideological reasons."

The Shelby/DeMarco War On Homeowners

Interest rates for new loans climbed slightly to an average of 4.33 percent for mortgages of $417,000 or less, according to the FHFA's own figures. But the FHFA isn't even making it easier for homeowners to refinance, even though some underwater homeowners are paying 6 or even 7 percent on their loans. In fact, the unelected Ed DeMarco/Richard Shelby mortgage junta is making it harder to refinance by charging more to do it.

Even the economic traditionalists - Ben Bernanke, Larry Summers, Tim Geithner - are outraged. As a recent white paper from the Federal Reserve noted, Fannie and Freddie aren't helping homeowners get loans - even when they clearly fall within the underwriting guidelines.

It would be sound financial management to help these homeowners refinance. But it would get in the way of the Shelby/DeMarco ideology.

Inside Bets

The Richard Shelby/Ed DeMarco FHFA is betting that these homeowners will never refinance - and it's paying some guy $2 million per year of taxpayer money, plus a huge bonus, to create complicated derivative-like deals to place its bets.

And just to show how far the Shelby/DeMarco crowd will go to push their radical-right agenda, they're even opposing a very reasonable lending program that allows homeowners to cut energy costs and improve the value of their home. President Bill Clinton explains here.

Remember: They do what they do for "ideological reasons."

The Real Cost of Shelby/DeMarco

The Shelby/DeMarco FHFA isn't just costing us $28 billion. It's also dragging down the entire real estate market, costing the entire economy tens of billions more.

And it's not as if they're good fiscal managers otherwise. After the massive bailouts that taxpayers were forced to pay for Fannie and Freddie, the Shelby/DeMarco FHFA is still bleeding red ink. DeMarco's Fannie Mae just came to Congress, hat in hand, asking the government to cover $4.6 billion in additional losses that it has incurred under the supervision of the Shelby/DeMarco FHFA.

How do these people keep their jobs? By having Richard Shelby around to abuse the Senate's rules.

The Senate's #1 Rule Abuser

Senators can put a "hold" on nominations, and Sen. Shelby has used this parliamentary trick in extraordinary ways. He put every single Presidential nomination in the nation - all of them - on hold in 2010, just so that he could get some pork for his home state of Alabama.

That's right: Richard Shelby was prepared to paralyze the government to get his earmarks passed.

As might be expected, President Obama made a very moderate choice when he appointed Joseph Smith to replace DeMarco. Smith was the former banking commissioner for South Carolina. He had an excellent reputation as a regulator, but he also had years of experience representing bankers as an attorney. So he was hardly a leftist firebrand.

That didn't stop Shelby from claiming, with characteristic discourtesy and disrespect, that Mr. Smith would be a "lapdog" for the Administration. Shelby then resorted to the characteristic procedural chicanery for which he has become so infamous, and killed Mr. Smith's nomination by placing another "hold" on it.

And that's how America's mortgages fell under the iron fist of the unelected Shelby/DeMarco regime.

Rocket In Your Pocket

He's never really cared about deficits. Shelby, the self-described conservative, even pulled out all the stops in an effort to get billions of dollars for his home state in order to build the world's biggest rocket.

Freudians might suspect that there is overcompensation involved, but the real motive's much simpler: he wants more taxpayer-funded pork for his corporate patrons in Huntsville. Shelby's cover story was that the rocket would improve the nation's "competitiveness and prestige" - as if mass foreclosures, endless recessions, and joblessness aren't hurting competitiveness and prestige.

But then, ending foreclosures won't make billions of dollars for Boeing Corporation. When big corporations want taxpayers dollars, it's deficits be damned. They can count on Richard Shelby to put a rocket in their pocket.

The Man Who Sold the World

So how much is Richard Shelby really costing the nation? $75 billion? $100 billion? More? We can't know - in part because Shelby soulmate Ed DeMarco isn't exactly forthcoming with his data. But we do know that Sen. Richard Shelby's partisan agenda may be the most expensive act of electoral manipulation in American history.

Meanwhile the foreclosures roll on. Each one is a story of family heartbreak. And each one drags the economy down even more. It's not just that the Shelby/DeMarco gang is made up of terrible fiscal managers, although that's certainly true. But the other thing to know about them is this:

They're not very nice people.

Arise, Ye Prisoners of Conservatism

You know who should join Occupy DC and the other great groups that are defending homeowners and pushing for the removal of Edward DeMarco? Fiscal conservatives. These guys are blowing a hole in the deficit the size of Indiana - literally. The total Indiana state budget is $28 billion - and that's for two years.

You know who else should show up? Anybody who says they're "tough on crime." The money Shelby and DeMarco are wasting would restore the cuts that the last Republican budget made to law enforcement - and would cover them for the next 28 years.

We could go on like this forever, but you get the idea. Edward DeMarco is costing the taxpayer $28 billion in direct losses, and is hurting the entire economy a whole lot more than that. He's also causing untold - and unnecessary - human suffering.

And who's keeping him in power? Sen. Richard Shelby, the $28 Billion Man. He's determined to win the next election for his party, and he doesn't care how much of your money it takes to do it.

More DeMarco Outrage: You Won't BELIEVE Who He's Considering for Fannie CEO

Richard Eskow — Tue, 21 Feb 2012 00:42:36 -0500

The other day we appeared on Sam Seder's program, The Majority Report, to discuss the radical-right ideology of Edward DeMarco, a Bush appointee who became Acting Director of the Federal Housing Finance Agency (FHFA) and continues in that role because Congress won't confirm President Obama's nominee.

As we wrote last week, DeMarco is single-handedly blocking relief for millions of struggling homeowners and is using deception to justify his actions. He refuses to allow Fannie Mae and Freddie Mac, the two government-sponsored enterprises he now directs, to reduce principal or even interest rates. Some underwater homeowners are paying as much as 7 percent interest, while loans are now available at 4.3 percent.

LISTEN

Hear Richard Eskow on "The Majority Report" discuss Federal Housing Finance Agency acting director Edward DeMarco's role in blocking real mortgage relief to families facing foreclosure or who are financially under water.

DeMarco deceived lawmakers by suggesting it would cost $100 billion to write down mortgage principal while, as we wrote last week, his own agency's estimates show that it would probably save more than $28 billion.

It gets worse. Even in the days since we taped this interview the DeMarco train has continued to ride the housing market off the rails. An academic has studied DeMarco's insistence on increasing the Fannie/Freddie financial portfolio - which he says has no bearing on his refusal to do more to help homeowners - and has concluded that "there is a very significant conflict of interest" which DeMarco and others have understated.

DeMarco's team has invested roughly $5 billion of Freddie Mac's $650 billion in "reverse floaters" which are essentially bets that the homeowners who aren't being helped by DeMarco's team will never get helped. That conflict of interest is actually understated, said Christopher Mayer of Columbia Business School, because these "floaters" are derivatives which link back to $26 to $30 billion in mortgages. That makes the amount of mortgage loans subject to this conflict five to six times what was originally believed.

It gets even worse. Adding insult to injury, Fannie Mae is currently hunting for a new CEO. Which names are at the top of the list? One of them is Fannie Mae's current Chief Counsel, Timothy Mayapoulos. What did Mayapoulos do before he joined Fannie Mae? He was chief counsel for Bank of America in 2008, when BofA was neck-deep in a wave of foreclosure fraud and other criminal activity. Bank of America has signed a number of multimillion dollar SEC settlements, and paid $410 million to settle charges that it illegally processed debit card transactions out of order in order to maximize overdraft fees.

That happened on Mayapoulos' watch.

But Bank of America's former top lawyer isn't the only candidate that DeMarco and his team are considering. Another candidate is David Stevens, CEO of the Mortgage Bankers Association. What does the Mortgage Bankers Association do? For one thing, it owns and operates MERS Inc., the shell company that is central to many cases of foreclosure fraud and deception. For another, it's the organization whose previous CEOs lectured homeowners on the immorality of walking away from underwater properties - while walking away from its own.

That's the kind of CEO that Edward DeMarco thinks should be handling the taxpayers' money and carrying out Fannie Mae's mission "to keep money flowing to mortgage lenders, to help strengthen the U.S. housing and mortgage markets, and to support affordable homeownership."

And that's why Edward DeMarco has to go.

Edward DeMarco: The Ideologue Who's Holding Homeowners - And the Economy - Hostage

Richard Eskow — Mon, 13 Feb 2012 19:37:27 -0500

Close your eyes and imagine:

The year is 2027. President Peace N. Love lost his re-election bid three years ago,after the disaster created by his military and intelligence cuts turned millions of Americans into homeless refugees.

His successor quickly appointed General Cathy Common-Sense (USMC, Ret.) to be Secretary of Defense. but Congress is controlled by President Love's party and refused to confirm her. So President Love's appointee, Sunshine Harmony Rainbow III, is still in charge at the Pentagon.

Defense Secretary Rainbow has halted all attempts to defend the homeland. "We're saving billions of dollars for the taxpayer instead," Secretary Rainbow tells Congress, "thanks to our secret plan. Maybe," the Secretary adds helpfully, "maybe we can spend the money learning to love one another." Soon it's discovered that Secretary Rainbow has misled Congress and the "plan" is really costing billions.

How do you think conservatives would react? How would voters react to a public servant like Sunshine Harmony Rainbow III?

Meet Edward J. DeMarco, the "Secretary Rainbow" of America's housing crisis.
_____________________

It's 2012. Irresponsible banking actions devastated the economy, driving millions out of their homes and leaving Americans with three-quarters of a trillion dollars owed to bailed-out banks for nonexistent property values.

Fannie and Freddie followed Wall Street's crazy behavior, rather than leading it. But that, plus the irresponsibility and greed of their 'privatized' executives, made it necessary for taxpayers to bail them out and take management control away from the failed private sector.

The housing crisis wasn't an act of God or an accident of fate. It was caused by radical conservatism and compliant 'centrism' that pushed deregulation - the economic equivalent of demilitarization - and stripped oversight agencies of their power. Deregulation is an impractical fantasy, which is why voters rejected it in 2008.

So why are the radical ideologues of this failed philosophy still controlling our fate?

FHFA: The Mortgage Pentagon

One agency, the Federal Housing Finance Agency (FHFA), has the power to dramatically change the situation. It controls Fannie Mae and Freddie Mac, which taxpayers repurchased and bailed out after they were destroyed by 'privatized' mismanagement and Wall Street greed.

Fannie and Freddie are behind more than half of the mortgages in the country. If the FHFA directed them to do so they could issue principal reductions, negotiate lower interest rates, push refinancing deals through the system, and dramatically reduce foreclosures.That would do far more than last week's settlement deal can ever hope to accomplish - without Congressional approval, with a stroke of its executive's pen.

But Congress has refused to appoint President Obama's nominee, Joseph Smith. Smith, as you might imagine from previous Obama appointments, is a centrist choice who should have been entirely non-controversial. He's a highly qualified and competent choice who has worked for banks as an attorney as well as having served as a regulator.

Smith isn't an ideologue - but Edward De Marco and his senior managers are. DeMarco's the Acting Director of the FHFA. He's still in charge because, three years after he was elected, Obama has been unable to get his choice approved.

A.W.O.L.

Like "Defense Secretary Rainbow" in our little story, De Marco refuses to carry out his agency's assignment for ideological reasons. The Defense Department's mission is to protect the American people from attack, and the FHFA's mission is to protect American homeowners - and in so doing, help the economy as well.

But instead of making it easier for homeowners to get relief, De Marco and his lieutenants are making it harder. Outrageously, they're even paying a financial manipulator millions in taxpayer money to bet billions against the same homeowners.They're betting that these homeowners can't refinance, while at the same time making it harder for the to do it..

The more these homeowners lose out, the more money the financial guy makes.

Wait. It gets worse.

Nothing For Money

As a letter from Reps. Elijah Cummings and John Tierney reveals, a former FHFA employee testified that there was a pilot program in principal reduction but "was terminated by senior officials at Fannie Mae who were 'philosophically opposed' to the concept of reducing principal."

If so, then these DeMarco appointees are also "philosophically opposed" to the mission of their own institution.

DeMarco didn't reveal the existence of this program or its termination in his Congressional testimony. He also misled Congress and the public when he said that principal forgiveness for all (underwater) mortgages would cost "almost $100 billion," since $100 billion is the estimated total of all underwater principal, not just the amount that would be reduced for distressed homeowners.

Another FHFA study showed that not reducing principal on these mortgages would cost more than $100 billion, as Cummings and Tierney noted, while yet another showed that a well-designed principal reduction program would actually save taxpayers $28 billion.

DeMarco didn't mention those studies, either.

Who Is Edward DeMarco?

DeMarco's a career bureaucrat who joined FHFA under George W. Bush and was named Acting Director by Obama in 2009. The FHFA is an independent agency, so both the White House and DeMarco claim that he can't be fired. But DeMarco is still obligated to carry out his agency's mission - and to speak truthfully to his ultimate employers, the American people. (He has refused to speak with reporters or respond to press inquiries on a number of occasions.)

DeMarco defends his unwillingness to carry out his duties by claiming that principal reductions for underwater homeowners - some of whom are still paying seven percent interest or more for nonexistent home value, when the prevailing rate is as much as three points lower - "would not meet (the FHFA's) responsibilities as conservator of Fannie and Freddie." He told Congress that "FHFA has a statutory responsibility to preserve and conserve the enterprises’ assets."

What agency on Earth has a greater responsibility to not spend money serving its purpose than it does to do its job? It seems absurd, doesn't it? DeMarco's suggesting that not doing anything is a greater obligation for his agency than carrying out the function for which it was created.

Reverse Mission Creep

When he talks about "statutory responsibility," DeMarco is presumably referring to a provision of Housing and Recovery Act of 2008 establishing the FHFA, which says that "in exercising any right, power, privilege, or authority as conservator or receiver ... the Agency shall conduct its operations in a manner which ... maximizes the net present value return from the sale or disposition of such assets."

But this is only one provision is a massive bill, one which reads like it was designed to address conservatorship for private-sector Federal home loan banks. Fannie and Freddie have an overarching objective which those banks don't have, which were the purpose for which they were created. That purpose is not to maximize asset value but to serve the public interest by helping homeowners.

Even James Lockhart, his Bush-appointed predecessor at the OHFEO (which became the FHFA), agrees with the assessment of Administration-friendly critics like Larry Summers that DeMarco is interpreting his mandate too narrowly.

What is the real purpose behind Freddie Mac and the FHFA?

Freddie's mission, clearly stated on its website, is "to stabilize the nation's residential mortgage markets and expand opportunities for homeownership and affordable rental housing ... (and) provide liquidity, stability and affordability to the U.S. housing market." The website lists Freddie's three key functions as follows:

Meet the needs of the mortgage market by making homeownership and rental housing more affordable
Reduce the number of foreclosures
Helping families keep their homes

The FHFA's mission in overseeing Fannie, Freddie, and the Federal home loan banks is laid out on its website, too. "to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market."

The phrase "saving the taxpayer money" cannot be found on either the Freddie Mac or FHFA website.

Ideology

But it's much too generous to say that DeMarco has interpreted his mandate "too narrowly." Even by that artificially constricted standard, DeMarco's refusal to permit principal reductions is an abrogation of his responsibility that's likely to cost taxpayers tens of billions of dollars.

Why? Why would an anti-spending bureaucrat insist on making such a costly decision? Perhaps DeMarco and his colleagues, like too many misguided Washingtonians, thinks that helping underwater homeowners would "reward the undeserving."

Few of their peers had the same compunctions toward Wall Street billionaires, of course, and there's ample evidence that these homeowners were deceived - by a bank-driven bubble, by mortgage brokers who misled them while banks "looked the other way," by deceptive appraisers who inflated their home's value, and by the widespread bank-fueled myth that "real estate values will always go up."

Even if you accept the wacky notion that an agency's highest obligation is to avoid executing its own function, however, DeMarco's rationale still doesn't wash. If DeMarco really believes that "asset management" and expense reduction is his prime responsibility, banks negotiate principal reductions all the time - for corporations. A sound fiscal manager would do the same thing here.

Besides, if DeMarco's prime responsibility is fiduciary, then he shouldn't let his moral judgments - sound or otherwise - interfere with the execution of his responsibility.

DeMarco also seems to be in an unseemly hurry to re-privatize Fannie and Freddie, despite the disastrous results the last time around. Consider former Fannie Mae CEO Daniel Mudd: An investigation concluded that he fostered an"arrogant and unethical corporate culture, where Fannie Mae employees manipulated accounting and earnings to trigger bonuses for senior executives."

Based on his actions, DeMarco apparently thinks those were the good old days.

Hostages

What other explanation is there? DeMarco's appointees are hurting their organizations - and the taxpayer - because they are "philosophically opposed" to carrying out their own mission statements.

It appears that the housing agency - and therefore the entire real estate market, and our whole economy - is in the grip of a conservative "Secretary Rainbow," an anti-government ideologue who would rather subvert his agency's mission in pursuit of a small-government agenda.

America's underwater homeowners, and its economy, are being held hostage to Edward DeMarco's ideology.

Dereliction

The actions of DeMarco and his appointees aren't just wrong. They're a subversion of their own duties.

Edward DeMarco has failed to carry out his responsibility as head of the FHFA. Intentionally or not, he has also misled Congress and the public, witheld vital information, and failed to answer questions from the press or the people's representatives in a timely fashion.

As Reps. Cummings and Tierney wrote:

" ... (N)ew information ... calls into serious question the accuracy and completeness of your response, as well as your motivation for continuing to oppose principal reduction programs even when they have the potential to save American taxpayers billions of dollars."

Those are serious charges. But then, not performing your duty is pretty serious too.

Rainbows

Given his aversion to candor, we can only speculate about Mr. DeMarco's motivation. But both public testimony and his actions themselves suggest that he holds fairly radical right-wing views that are well outside the mainstream. That's certainly his right, just as it's every American's right to believe that military action is morally wrong.

But a pacifist would be a poor choice for Defense Secretary, and an apparent anti-government ideologue is a poor choice to lead the FHFA - especially when that ideologue appears to play fast and loose with the facts.

All of which raises the question: Why is Edward DeMarco still in this important post? We need leaders to solve our housing problem. Instead, this responsibility has been left in the hands of an ideologue whose deregulatory dreamworld is made up of nothing but rainbows.