Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Guardian, Men's Journal, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndyKroll.

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Should Fannie and Freddie Be Killed or Kept Alive?

Experts debate the fate of the troubled twins that backstop the vast majority of America's mortgages.

| Wed Aug. 18, 2010 6:00 AM EDT

On Tuesday, the Treasury Department played host to a who's-who of the housing industry: bank executives, bureaucrats, think tankers, academics, and  investors, who gathered in the ornate Cash Room to offer their two cents on how to fix the broken housing finance system, and in particular, Fannie Mae and Freddie Mac. The two housing corporations, which backstop the vast majority of America's mortgages, have had their balance sheets and reputations badly wounded in the past couple of years. Since the federal government essentially nationalized them in September 2008, taxpayers have propped up Fannie and Freddie to the tune of $148 billion. With $5 trillion in debt on their books, and no plan in place for their future, the troubled twins have become a political lightning rod and punching bags for the GOP.

So what do the brightest minds in housing envision see in store for Fannie and Freddie? Depends on who's got the mic. The recommendations offered at yesterday's conference ranged from fully nationalizing housing finance to getting government out of the business of guaranteeing loans. The Obama administration was somewhere in the middle, offering new but vague ideas on tackling its Fannie/Freddie problem.

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Bond Guru: Nationalize Fannie, Freddie

Kill 'em? Grow 'em? Opinions on the fate of Fannie Mae and Freddie Mac.

| Tue Aug. 17, 2010 1:13 PM EDT

When Bill Gross, who leads the planet's biggest bond fund, Pacific Investment Management Co. (PIMCO), has something to say, people in finance listen up. And you can bet that the major players in the housing industry were listening closely today during Gross' remarks at the Treasury Department's "Future of Housing Finance" conference. On the subject how to fix the financial system backing the mortgage markets, including the fate of government housing giants Fannie Mae and Freddie Mac, Gross was unequivocal: There should be "full nationalization" of housing finance, he said today. "Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won't work."

Gross' opinion was, not surprisingly, at odds with some of his fellow speakers at the Treasury conference. More conservative experts advocated getting government out of housing finance altogether, and abolishing Fannie and Freddie, which, combined with Ginnie Mae, currently backstop nearly 90 percent of the mortgages issued in the first half of 2010. With that in mind, you've got to question the privatization hawks here: After all, won't eliminating Fannie and Freddie and leaving the private market to do the job kill the mortgage market?

More moderate voices at today's event included Treasury Secretary Tim Geithner and Department of Housing and Urban Development Secretary Shaun Donovan. Both secretaries reassured investors and the public that government would continue to support the housing markets—but not indefinitely. "The government's footprint in the housing market needs to be smaller than it is today, where FHA and the GSEs collectively guarantee more than 90 percent of all mortgages," Donovan said. Geithner added that fixing housing finance isn't a matter of nationalization or privatization, but determining "how much" of a role the government should play in the future.

As to that question, today's event hasn't offered too many answers. And with Treasury not issuing definite recommendations on what to do with Fannie and Freddie and housing finance as a whole until January, it looks like we'll have to settle with generalizations, some wildly divergent opinions, and more partisan bickering for a bit longer.

More Misery in Foreclosureland

The latest damning report on Obama's signature housing relief program.

| Mon Aug. 16, 2010 12:50 PM EDT

Imagine this: To apply for a job, you're asked to submit your application and resume six separate times because the employer can't manage to hold onto each previous submission. Or the company somehow claims it never showed up in the first place. Infuriating, right? Now imagine that you're trying to save your home—you're stressed, probably unemployed and looking for a new job—and, in your effort to lower your house payments, your mortgage servicing company makes you submit your most important financial information six times.

As awful as that sounds, that's the reality with the Obama administration's main homeowner relief program, as a scathing new report by ProPublica, out today, illustrates. ProPublica's Paul Kiel and Olga Pierce analyzed detailed survey data from 373 homeowners who applied for relief through the Home Affordable Modification Program, a multi-billion-dollar program intended to get servicers to lower mortgage payments and keep people in their homes. HAMP, as I've reported before, is more or less a failure, with less than 400,000 homeowners receiving permanent relief out of 1.3 million applicants; by contrast, more than 520,000 have been booted out of the program. Part of that failure can be chalked up to unscrupulous and profit-hungry foreclosure attorneys. But for the most part, mortgage servicers, Fannie Mae and Freddie Mac, and the federal government are to blame.

Here's what ProPublica's survey found:

Seeking a modification has been an infuriating, stressful nightmare: a black hole of time lost repeatedly calling an 800 number, faxing and mailing the same documents over and over, and coping with the ramifications of errors made by poorly trained bank employees.

Here's what those homeowners told us:

  • On average, they'd been seeking a modification for more than 14 months.
  • The process is designed to last only a few months. Homeowners seeking modifications reported having to send the same documents nearly six times on average.
  • 175 homeowners say they were advised, incorrectly, to fall behind on their mortgage in order to qualify for a modification.

One finding in the story especially popped out at me:

Servicing employees frequently, and incorrectly, suggest homeowners should fall behind on a mortgage in order to get help. Though servicers and housing counselors agree it is never a good idea to fall behind on your mortgage if you can help it, 175 homeowners reported being advised to do just that. [emphasis theirs]

Countless attorneys I've interviewed in my own foreclosure-related reporting have told me the same thing—that clients of theirs stuck in unaffordable mortgages, but still managing to pay on time, have asked for modifications but were told by servicers to go into default first. Only then would they get their modification. As you can imagine, given the utter failure of mortgage servicers to modify loans, many of those people told to default ended up in foreclosure court, where a judge, unaware of how Foreclosure Inc. operates, likely scolded them for "not paying their mortgage."

There are plenty more startling statistics (and some sharp charts, too!) in ProPublica's story. It's yet another damning critique of HAMP, not long after the Huffington Post blasted the program, and will only increase demands that the program be scrapped altogether.

FL's Jeff Greene "Not a Partier"

Florida's rogue Senate candidate denies "Jersey Shore"-esque stories.

| Mon Aug. 16, 2010 10:03 AM EDT

It's none too often that a candidate for US Senate needs time at a press conference to deny stories of wild, late-night, vomit-filled parties on his mega-yacht—and to explain, once again, that he's "not a partier." Then again, the fight for Florida's Democratic Senate nomination is anything but your typical primary race.

On Friday, Greene fielded questions at a press conference in Tallahassee about allegations from former deckhands that his yacht had hosted lurid parties more reminiscent of Jersey Shore than peaceful Caribbean cruises. As the St. Petersburg Times reports, a former employee on Greene's yacht, Summerwind, claimed the yacht "is known to be a party yacht. When it went to Cuba, everybody talked about the vomit caked all over the sides from all the partying going on." The paper cites a vignette from Gregory Zuckerman's book, The Greatest Trade Ever:

"Greene brought two Ukrainian strippers on board to make a cameo appearance and hired stewardesses from coastal towns to serve as his crew. Some doubled as massage therapists, which came in handy after a day of scuba diving, Jet Skiing, or kayaking."

Greene's campaign has repeatedly denied these stories or corrected them; a campaign spokesperson, for instance, told the St. Pete Times that "Jeff was traveling on his boat with his rabbi and his younger brother to visit Jewish sites in Romania and Odessa" and was not bringing strippers on board. And at Friday's press conference, Greene himself insisted that he's "not a partier":

Whether his partying—or not—days will sink his chances at the polls remains to be seen. A Mason-Dixon poll on Aug. 8 and 11 gave his primary contender, Rep. Kendrick Meek, a massive 14-point lead of 40 percent to 26 percent. But in an Ipsos poll conducted around the same time, Greene led with 40 percent, while Meek had only 32 percent. Pollsters, in other words, are just as confused as Florida voters.

Meek and Greene both have one remaining week to make a final push for support. Not surprisingly, Meek has ripped billionaire—and former Republican—Greene every chance he's gotten, recently quipping regarding Greene's choice of Mike Tyson as his best man at his 2007 wedding, "It's definitely not on the-things-to-do list if you want to run for public office." Stumping for Meek is former president Bill Clinton, while the deep-pocketed Greene will surely unleash a barrage of last-minute ads to push him over the top. Until next Tuesday's results come in, the Democratic primary winner is still anyone's guess.

Wall St.: Cutting Off Big Coal's Baddest?

Banks are deciding that underwriting destructive mining practice isn't good business.

| Thu Aug. 12, 2010 6:00 AM EDT

After nearly wrecking the global economy, pocketing trillion-dollar bailouts, and now profiting handsomely while the American economy sputters, it's hard to muster any praise at all for the titans of Wall Street. Some recent developments on the Street, though, do deserve plaudits, however tempered: Over the past two years, many of the world's biggest banks have limited or severed ties with one of the world's most environmentally destructive practices, mountaintop removal mining.

Concentrated in the Appalachian region, MTR mining involves blasting the peaks off mountains to expose the black veins of coal underneath. But the byproduct of MTR is tons of rubble and waste from the demolition that eventually quickly finds its way into nearby rivers, streams, and other water sources, severely contaminating them. As a result, local wildlife is killed off and nearby communities suffer prolonged health issues. And as scientist Margaret Palmer at the University of Maryland's Center for Environmental Science has testified (pdf), there's really no way to mitigate the effects of MTR. For years, the coal companies practicing MTR mining operated thanks to billions in loans from the world's biggest banks, who arranged funding deals to facilitate MTR projects.

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