Today’s Courier Herald Column:
Super Tuesday will be Georgia’s brief moment on the national stage with respect to Presidential politics. Though the stage will be crowded, Georgia’s delegate count and the fact that polls show Newt Gingrich may not have his “home” state locked up should give the state its fair share of attention over the next few weeks.
During the early part of Presidential campaigns, each early state gets to make the candidates make pledges on issues that are near and dear to the hears of those state’s voters. Iowa is famous for making candidates pledge to defend ethanol subsidies. South Carolina had the contenders promising to defend a non-union Boeing plant and talk about the need for deepening Charleston harbor.
Georgia remains mired in a housing problem more than three years after the 2008 housing collapse. A new RealtyTrac survey indicates that one in 328 Georgia homes were involved in foreclosure during January alone. The Atlanta region, a leader in population and job growth for decades, has remained stagnant in both areas.
Georgians now rank dead last in financial security largely due to falling home prices and homeowners owing more than their homes are worth. An estimated 60% of homes in metro Atlanta remain “underwater”, with nearly one third of Georgia homeowners owing more than their home is worth statewide.
Georgia’s community banks are the most stressed in the nation, with Georgia losing more banks to FDIC takeover than any other state since the bust began. Federal policies that favored the largest banks appear to have penalized the smallest, with one in four Georgia banks receiving the death penalty.
Congressman Lynn Westmoreland who has held hearings on the subject of changing FDIC regulations and how loss sharing arrangements have negatively impacted Georgia’s remaining banks, would probably be a good source of information from Presidential candidates needing to understand effects of federal action and inaction at the micro level.
Georgia Attorney General Sam Olens recently announced Georgia’s share of a landmark settlement with 5 large banks, with Georgia and Georgia homeowners receiving $814 Million of a total estimated $25 Billion agreement. Georgia’s share was based on the number of mortgages originated by those five banks. Georgia is in negotiations with 9 other banks using this settlement as a pattern.
Under this settlement, some homeowners will receive principal writedowns, some will get lower interest rates, and some already foreclosed on will receive about $1,800 as a settlement, all paid for by the banks. The state will also receive about $100 Million directly to Georgia’s treasury.
But customers who took out their mortgages from these banks whose loans were underwritten by Fannie Mae or Freddie Mac are ineligible, as the state has no jurisdiction over federal entities. And once again, this illustrates why there must be a federal role in the cleanup of the current mortgage and foreclosure mess.
Candidate Mitt Romney has stated repeatedly that the market must be left alone and allowed to work, declining a federal role in addressing the problem. With more than 70% of outstanding loans held by the federal government or a government backed institution, the recent mortgage settlement demonstrates why the feds must look at how to handle the problem loans currently on the books.
Furthermore, the only reason there currently remains a mortgage market is federal programs. FHA, Fannie Mae, Freddie Mac, and the VA account for more than 80% of all mortgages currently originated. Thus, the federal government – and all rules and regulations it makes or doesn’t make – IS the current market. Stating the government must stay out of the way and let the markets work themselves out is willful ignorance of an obvious and ongoing problem.
Gingrich, for his part, has indicated that he would repeal Dodd-Frank and is open to reinstating the Glass-Steagall act, which separated FDIC insured banks from the more risky, highly leveraged investment banks. Yet most questions posed to Gingrich are not about moving forward, but about his past consulting contract as a “historian” for Freddie Mac. That ground has already been plowed, and Georgians must press for answers on how to move forward.
Santorum will likely spend his Georgia time searching for the plentiful bounty of evangelical votes. Yet if Santorum is to morph into a candidate with broad support of the party’s base and establishment, he must demonstrate a bigger range of issues. Again, understanding the causes and potential solutions of the state and nation’s housing crisis would be a good place to start.
Each of the three leading candidates will be in Georgia between Friday night and Sunday. Georgia voters as well as local press must demand specific answers that address the candidates’ outlook on how to move forward. Georgians need to hear how to restore home ownership as an individual’s largest investment, not remain their largest liability.