It's not often in Washington that you see wealthy, conservative investor types and their lawyers sitting down with professional affordable housing advocates. But on Wednesday morning, anti-corporate crusader Ralph Nader — now stooped and gray, nearing his 80th birthday — brought them together.
Their cause? Saving Fannie Mae and Freddie Mac from obliteration.
It's a herculean effort. Democrats and Republicans don't agree on much these days, but a broad consensus — from Rep. Jeb Hensarling to the White House — has coalesced around the conclusion that the now-hated housing finance agencies need to be junked, and something else built in their place. A bipartisan bill pushed by Senators Mark Warner and Bob Corker and framed around proposals put forward by center-left groups has taken on an air of inevitability, just waiting for a legislative window to move forward.
That would be terrible for hedge funds who own stock in the quasi-public companies, which back or own 60 percent of U.S. home loans. They're already furious that the gangbusters profits Fannie and Freddie have been generating as the housing market heats up are all being swept into the U.S. Treasury, rather than paid out to shareholders as dividends.
"The administration's attempt to wipe out private investors is every bit as unlawful and antithetical to the core American value of private property as President Truman's seizure of the steel mills," intoned Ted Olson, the conservative super-lawyer who represents hedge funds suing the government over the decision. "I don't know if it's Ralph moving or me moving, but we're aligned more and more these days."
The big shareholders depicted the decision as tantamount to socialism.
"If they can do a net worth sweep of Fannie Mae and Freddie Mac, they can do a net worth sweep of anything in this room," warned Tim Pagliara, a Tennessee wealth manager whose clients own some 8 million shares. "That sounds a whole lot like Venezuela coming to America."
But Nader, who owns stock in the companies and has been on a campaign to restore shareholders' say in how they're governed, knows that hedge funds aren't the most sympathetic of victims. So with the help of a public affairs firm, he also invited the heads of major affordable housing and community activism groups, who oppose winding down Fannie and Freddie in part because they fear the commitment to preserving access to mortgage credit for low-income and minority communities might be wiped out in the process.
"We're about to end that system, that treats all Americans regardless of income, if they have the ability to pay for a mortgage, they'll get one," thundered John Taylor, president of the National Community Reinvestment Coalition. "I'm not a hedge fund guy. They have their fight, they have their lawyers, they'll do their thing, to make sure their interests are made whole. That's not where I'm coming from. I'm coming from, don't mess up a system that actually worked extremely well, a homeownership rate in the United States that made us the envy of the universe."
Unity of the left and the right against the corporate state: That's what Nader sees as the path forward on a number of issues, from trade (where tea partiers have joined with groups like Nader's own Public Citizen against two major agreements) to organizing against military intervention. It's even the subject of his forthcoming book, "Unstoppable." And he's willing to cooperate with mighty interests in order to achieve his goals.
"On the side of affordable housing, believe it or not, is one of the most powerful lobbies in Washington, and that's the National Association of Realtors. Corker-Warner isn't going anywhere in Washington unless the Realtors get behind it, and I don't think they ever will," Nader said. "They aren't angels either. They've made a lot of money. However, they know that when you have a stable market with adequate capital, when you have decent underwriting standards that aren't too risky, that they're going to have a good time, and they're going to make money, and it's going to be predictable."
But here's the problem: These oddball coalitions are usually most useful in just stopping things that previously appeared inevitable, rather than forging their own paths forward.
That dynamic was plainly on display in yesterday's panel. While the investors agreed with the affordable housing advocates that Corker and Warner's bill was unacceptable, agreement broke down over exactly how to preserve and expand affordable housing while making shareholders whole. Pagliara, for example, said a fee assessed on every mortgage that would support the construction of apartment buildings (which Corker-Warner includes) was a better idea than setting lending guidelines to favor low-income and minority borrowers — which Sheila Crowley, president of the National Low Income Housing Coalition, says is necessary to preserve their access to credit.
Asked afterwards what new concept he thought could unify both these groups, Nader didn't quite have an answer.
"That's a level of detail this conference did not reach," Nader said. "Right now, it looks like a good idea is a public utility, as far as I'm concerned. You still have shareholders, you still have capital, just like an electric company, just like a gas company. But you wouldn't have this wheeling and dealing at the top, massive executive compensation and lobbying."
That sounds a lot like the plan put forward by the Bipartisan Policy Commission, on which the Corker-Warner bill was partially based. Nader's tenuous coalition hasn't described what its alternative would look like, just what they don't want it to include. Which means they're not really a coalition at all — just a bunch of interest groups trying to ensure that their own needs get met.