Washington is very good at creating things out of thin air. The Federal Reserve has created trillions of dollars that it has used to buy securities in an attempt to hold down interest rates. Congressional Republicans have created numerous reasons why having the federal government default on its debt is a marvelous idea. And now the Obama administration has responded to the national yearning for grownup behavior in Washington by creating bogus bipartisanship.
President Obama did that in his recent speech in Galesburg, Ill., where the White House launched its sales campaign for its economic policies. It was only two sentences of an hourlong speech, but it was a telling example of how Washington works. Or doesn’t.
Obama said, “I’ve asked Congress to pass a really good, bipartisan idea — one that was championed, by the way, by Mitt Romney’s economic adviser — and this is the idea to give every homeowner the chance to refinance their mortgage while rates are still low so they can save thousands of dollars a year. It would be like a tax cut for families who can refinance.”
In fact, it’s a wonderful idea, initially floated in 2008 by Glenn Hubbard, dean of the Columbia Business School, who became a top Romney adviser. But guess what? Two years ago, when the proposal would have helped millions more people than it would now, the administration wanted no part of it.
How do I know this? Because in 2011, I was working on an article about the Hubbard proposal, whose co-authors were Hubbard’s Columbia colleague Chris Mayer and mortgage expert Alan Boyce. At the time, I tried in vain to get the White House and the Treasury Department to discuss the plan, which I had heard about from Sheila Bair, former head of the Federal Deposit Insurance Corp. (and current Fortune columnist), a major supporter of it.
The point of the plan was to help homeowners who had made their payments faithfully but couldn’t refinance their high-interest mortgages because declines in their houses’ value had reduced or totally wiped out their equity. They would be allowed to refinance at today’s low rates if their mortgage was owned by Fannie Mae or Freddie Mac, the two taxpayer-owned entities. The Obama administration was dismissive of the idea, which I praised as a way to have Wall Street bail out Main Street at no cost to taxpayers.
So you can see why my curiosity was aroused when I heard Obama say he had proposed a “bipartisan” refinancing plan to Congress. The White House wouldn’t respond to my request for information about when this had happened. However, my Fortune colleague Tory Newmyer found a sentence on page 25 of the president’s 2014 budget proposal saying that the administration “is calling on Congress to take additional steps so virtually every family that has a standard mortgage and has been making its payments on time will have the opportunity to refinance their mortgage at today’s historically low rates.” The document, submitted to Congress in April, says nothing about this being a bipartisan proposal.
To be fair, the administration has done a lot to encourage mass refinancing by homeowners who didn’t have enough home equity for a normal refinance. That’s praise-worthy. However, aspects of the program, called HARP 2 (Home Affordable Refinance Program), were less favorable to homeowners than Hubbard-Mayer-Boyce would have been, and more favorable to big banks.
Goldman Sachs estimates that 8 million homeowners could benefit from Hubbard-Mayer-Boyce today. But that’s down from 20 million near the end of 2011 because home prices and mortgage rates have risen since then and many owners have already refinanced.
Perhaps the White House will transform sound bite into substance by actually pushing the Hubbard-Mayer-Boyce plan, rather than just patting itself on the back for creating after-the-fact bipartisanship. But given how image trumps issues in Washington, I won’t hold my breath waiting for that to happen. You shouldn’t either.
Sloan is Fortune magazine’s senior editor at large.