Best of 2009: The Tea Party Revolt and the Politics of Ignorance
All day, we’re re-running our favorite blog posts of the last year. This post was originally published on Feb. 28, 2009.
As Dave Weigel notes, the Tea Party movement to protest the mortgage rescue plan and other government bailouts rolls on, with a planned rally Friday in front of the White House. The revolt over bailouts got a big boost last week with the televised rant by CNBC’s Rick Santelli against helping troubled borrowers, and only has grown since then. Even Joe the Plumber is expected to show up on Friday, ensuring even more media coverage of the event.
When it comes to the mortgage rescue piece, I’m not exactly going out on a limb here when I say I’m betting that Joe the Plumber and the majority of those who show up on Friday haven’t even looked at the details of the plan. Santelli already has admitted he hasn’t read it. And that’s really too bad. Because if they had bothered to read what’s actually in there, they might not bother protesting.
All week, I’ve been talking to housing advocates and experts, and they’re all expressing the same emotion over the mortgage rescue plan: Disappointment. As TWI’s Mike Lillis wrote, many consumer groups said they thought the plan fell short when it was first introduced last week. But it goes beyond that — although some help for homeowners is better than nothing, the Obama administration’s plan is hardly the breakthrough advocates of loan modifications were hoping for.
For example, it doesn’t include any legal protection for servicers to do modifications without fear of being sued by investors — the major impediment to mass loan modifications. The problem has tripped up everyone from Federal Deposit Insurance Corporation Chair Sheila Bair to grassroots housing organizer Bruce Marks of the Neighborhood Assistance Corporation of America. I’m hearing talk that the administration rushed the plan and couldn’t get that part together in time, and it may include servicer protections at some point in the future. But for now it’s not in there — which means the mass loan modifications the Tea Party folks are protesting aren’t likely to become a reality anytime soon.
President Obama also was entirely accurate when he vowed during his speech Tuesday that the plan won’t help homeowners who bought bigger houses than they can afford. That’s because the plan has stringent limits on how far underwater a homeowner can be, in order to qualify for a loan modification. If they owe significantly more on their mortgages than their homes are worth, they won’t get help. Rick Sharga, vice president of marketing for RealtyTrac, which collects foreclosure data, told me Wednesday that many homeowners in California are further underwater on their loans than the plan’s limits allow, so the plan offers nothing for them. That’s probably true in the other bubble markets as well, such as Nevada, Florida, Arizona and elsewhere.
No one’s sure exactly how the Obama housing plan will play out, but they don’t expect it to have more than a moderate effect on slowing down foreclosures. And there is still a tsunami coming, with $1 trillion worth of Alt-A “liar’s loans” resetting to higher monthly payments this year, and in every year of Obama’s first term. The Center for Responsible Lending breaks down the numbers and finds 6,600 new foreclosures a day, or one every 13 seconds. Some 45 million homeowners not facing foreclosure are projected to experience a $233 billion decline in the value of their homes, due to several million foreclosures expected in the next two years. We’re in a mess that’s only getting worse, and protesting against a small-scale attempt to stem some of the damage simply ignores reality.
I can understand how Santelli, Joe the Plumber, and the other Tea Party folks might not be intimately familiar with the housing plan’s details. They’re for us loan modification junkies, an admittedly small group. But if you’re going to organize a protest, you should at least have a grasp of the basic idea here — and it’s pretty obvious we’re talking about a very modest government effort. It’s entertaining to throw a tirade about a neighbor who bought a bigger house to get an extra bathroom, as Santelli did. But look closer at the housing plan, and that neighbor probably won’t qualify for a loan mod.
The Tea Party folks aren’t letting that sort of thing get in the way of their big plans. It would be a lot harder to throw a revolt if you bothered to tell people the truth about the foreclosure mess that still lies ahead, and how little has actually been done to address it.