From 2001 to 2003, Glenn Hubbard served as President George W. Bush’s chief economist. Today, he’s dean of Columbia University’s School of Business and one of Mitt Romney’s top economic advisers. But right now, the candidate who could most benefit from his advice is President Obama.
Hubbard is an advocate for using Fannie Mae and Freddie Mac to set off a nationwide wave of mortgage refinancing. In a paper co-authored with Columbia economist Christopher Mayer, Hubbard estimates that more than 75 percent of the homeowners with 30-year mortgages backed by Fannie or Freddie are paying interest rates higher than 5 percent. But for the past two years, interest rates have been closer to 4 percent. That means tens of millions of Americans are paying more than they need to every single month.
Ezra Klein is the editor of Wonkblog and a columnist at the Washington Post, as well as a contributor to MSNBC and Bloomberg. His work focuses on domestic and economic policymaking, as well as the political system that’s constantly screwing it up. He really likes graphs, and is on Twitter, Google+ and Facebook. E-mail him here.
Some of these homeowners have good reason to resist refinancing. They plan to move soon, or they lied on their initial mortgage application. Some have been scared off of new financial products by the events of the past few years. But many simply don’t follow the month-to-month gyrations of interest rates. Others are deterred by conditions set down by Fannie and Freddie — although those have been substantially eased over the past few months, albeit with little fanfare.
Those homeowners represent one of the president’s few remaining opportunities to help a substantial number of Americans. That’s because a major push on refinancing is one of the few policies the Obama administration could accomplish without the help of Congress.
In recent months, the White House has come to an overdue realization: Republicans in Congress will not, and arguably cannot, work with them on anything big. They won’t partner with the president on infrastructure spending. They won’t join him to expand the payroll tax cut. They won’t strike a deficit deal that includes taxes.
This has led to the “we can’t wait” campaign, in which the president maximizes his executive authority to make changes that congressional Republicans are resisting. The most concrete example of the White House’s newly muscular approach is the decision to recess-appoint a new director of the Consumer Finance Protection Bureau and three new members of the National Labor Relations Board over Republican objections.
But those appointments will do little for the larger economy. A more promising avenue for an impatient administration is to recess-appoint a new director of the Federal Housing Finance Authority — the body that oversees Fannie Mae and Freddie Mac.
The authority is overseen by Edward DeMarco, a career civil servant who became acting director when James Lockhart, Bush’s pick, stepped down early in Obama’s term. DeMarco is respected by both sides of the aisle, but he has opposed many of the Obama administration’s efforts to use Fannie and Freddie to help the ailing housing system.
The Obama administration waited until late 2010 to nominate its own candidate to lead Fannie and Freddie, but by that point, Democrats had lost their 60-vote majority in the Senate and Republicans blocked the Obama administration’s choice.