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.

The Department of Justice may have dropped its case against former House Majority Leader Tom DeLay, but he's not off the hook entirely—at least just yet. DeLay still faces criminal money laundering and conspiracy charges for funneling money into 2002 state legislative races in Texas. The criminal case is up for a hearing next week.

The scheme was part of DeLay's 2003 effort to redraw the state's Congressional map to favor Republicans, as state legislators must approve redistricting changes. As the AP reminds us, DeLay and his two co-defendants are accused of funneling $190,000 in corporate money through the Republican National Committee, then back to state legislative candidates, in violation of state law. DeLay blames the "politics of personal destruction" for the charges against him. "I know this is the price of leadership, but it doesn't have to happen this way...I still have a trial to go through," he told reporters Monday, referring to the Texas case. "I'm hoping to win that. I know I will."

Both cases against the man-formerly-known-as-the-Hammer have spent years churning through the system, but the timing of DeLay's Texas case seems particularly apt, as the next round of redistricting will happen nationwide in 2011, to reflect population changes recorded in the 2010 Census. The American Prospect's Paul Waldman has a good overview of the new organizations, both Democratic and Republican, that have raised millions to put their party in a better position for 2011. Stay tuned for my own story on the next big redistricting battle.

Guess who’s back? The Big Three and Detroit. Well, maybe Detroit. On Monday, the New York Times showed some serious love for Chrysler, Ford, and GM’s willingness to pursue a new way of doing business:

Many of the excesses of the past—overproduction, bloated vehicle lineups, expensive rebates—are gone. All three carmakers have shed workers, plants and brands. And a new breed of top management—the three chief executives are outsiders to Detroit, as is the newly named GM chief executive — says it is determined to keep the Big Three lean, agile and focused on building better cars that earn a profit.

The proof is in the sales pudding: in July, GM, Ford and Chrysler sold their vehicles at for $1,350 more than a year ago—outpacing the broader auto industry's gain by about $200. The Times credits the Big Three's resurgence to a strategic draw-down in inventory and cuts in labor costs. With General Motors’ historic IPO pending, good times are supposedly right around the corner. And not-CEO-in-chief Barack Obama is only too happy for Treasury to begin selling off its 61% majority share in the company—just in time for elections.

But what about jobs? The White House has always insisted that the auto bailout had to happen to save the midwest. But looking at the numbers, it’s hard to get too excited:

While Obama has trumpeted the figure of 55,000 auto jobs added since June 2009, this remains a puny number both in absolute terms, as well as relative to auto employment overall—which exceeded 1.1 million in 2005. It also comes out to over $1 million in taxpayer assistance per job created. . . . Corporate welfare has turned out to be enormously profitable for auto executives, but has saddled the taxpayer with enormous risk and costs, while doing little to benefit American workers.

Automakers and their suppliers shed 330,000 jobs in 2008 alone. Suddenly 55,000 doesn’t sound like such a big number. Relocation prognosticators in Michigan think that around 2,500 jobs are on their way to the state in the next two years—a development that will supposedly lead to a real estate boom. But economic analysts say that new manufacturing jobs will command lower wages, and won’t do enough to balance out the massive job losses of the past ten years.

It would be unfair and a little ridiculous to suggest that the recovery should have already completely restored all of the jobs the economy lost in recent years. In fact, there’s no real reason to think that the Big Three or Obama even want to restore the automaking labor market to its full capacity: if the idea is to cut inventory, boost efficiency, and streamline business, it makes sense that the key stakeholders would want to do more with less. When you’re creating a brand-new business model, just how many recovered jobs equal a recovery?

In the end, it’s unclear what the bailed-out Big Three will offer blue-collar workers. The Times points out that a big chunk of Chrysler’s new hires are white-collar types brought in to work as entry-level engineers and managers at its suburban HQ. Detroit's tax base could certainly use a shot in the arm, but it's not the suburbs that need the push. They're not in danger of falling off the face of the planet. That's not to say that the birth of the leaner, meaner Big Three necessitates yet one more death for the working class. But it's not enough to say that jobs are coming back. We'll also have to watch what kind of jobs they are—and how much they pay.


Soldiers of Crusader Troop, 1st Squadron, 278th Armored Cavalry Regiment headquartered in Milan, Tenn., can be seen leaving a trail of dust across the desert surrounding Q-West, Iraq, on their routine perimeter patrols that are used to ensure the security of the base and its residents. Photo via the US Army.

The Justice Department has chosen not to prosecute Jack Abramoff associate and former Republican Majority Leader Tom DeLay, the ex-congressman's attorney said Friday.

Here's a quick refresher on the gerrymandering, permanent majority-building, bug-zapping, Clinton-impeaching, samba-dancing, power-buying, Texas Republican's misdeeds. In brief: DeLay was indicted on conspiracy and money laundering charges in 2005 for allegedly conspiring to launder corporate money during the 2002 elections in an effort to guarantee a GOP majority in the Texas State House. (That case is still pending.)* His ties with Abramoff were the focus of a six-year-long investigation by federal authorities that is now apparently closed.

Melanie Sloan, the executive director of Citizens for Responsibility and Ethics in Washington (CREW), responds to the news: 

It’s a sad day for America when one of the most corrupt members to ever walk the halls of Congress gets a free pass. As we continue the work of building a Washington that is worthy of the American people, the Justice Department’s decision not to prosecute Mr. DeLay for his actions sends exactly the wrong message to current and future members. The fact that Jack Abramoff and Bob Ney (R-OH) are the only two people who went to prison for one of the worst corruption scandals in congressional history is shocking. The Hammer belongs in the slammer. Mr. DeLay still has crimes to answer for in Texas—generally not considered the best place to be a criminal defendant.

Why does this matter? Because thanks to upcoming gubernatorial elections and the 2010 census, redistricting is back on the political menu for next year (though his indictment for the Texas campaign finance charges is a separate, still pending case). Sloan's "wrong message"—that opportunistic power grabbers around the country need take no heed and fear no retribution for artless political engineering—is that politics continues. As usual.

* This post has been edited since it was first published.

By my count, there isn't a single Senate race right now in which Democrats have a better-than-even shot to take a Republican seat. The Dems even trail in the open-seat contests in Ohio and Missouri—thought to be their best pickup opportunities. On the House side, the situation is much the same. But there, at least, one can see some bright spots for the blue team.

  • In Delaware, a recent Rasmussen poll shows Lt. Gov. John Carney leading two unknown Republicans by double digits. The Dems should be able to pick up longtime GOP Rep. Mike Castle's house seat—but only because he's running for Senate. 
  • In Hawaii, Democrats have finally sorted out the internal battle that caused them to split the vote against Honolulu City councilman (and now-Rep.) Charles Djou in a May special election. State Sen. Colleen Hanabusa, who took the larger chunk of the split Dem vote in May, will face Djou in a rematch. Djou will need more than the 39 percent he won in the spring if he hopes to hold on to his seat this fall. 
  • In Louisiana, Rep. Joseph Cao became the first Republican since 1890 to win in the New Orleans-centered 2nd Congressional District when he ousted corrupt incumbent Dem William Jefferson in 2008. Our own Suzy Khimm has suggested that Cao might hold on—but in a district that is more Democratic than the vast majority of House districts, it'll be a heavy lift.
  • In Illinois, Dems hope to pick up the suburban Chicago district that was held for five terms by GOPer Mark Kirk, who is running for Barack Obama's old Senate seat. The district is solidly Democratic in presidential elections (61 percent voted for Obama), but voters there elected the moderate Kirk again and again (Kirk twice beat Dan Seals, who's running again this year). But like the Delaware contest, this race is only competitive because the incumbent left it to run for Senate (and has a good chance of winning.)

That's really about it—and the Illinois race is a bit of a stretch if we're only counting contests where the Dems have a "better than even" shot. Needless to say, four pickups is not going to do much to counteract the problems that dozens of Dem incumbents face this fall. That sound you hear is minority leader John Boehner giggling. 

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.

Over at Salon, Justin Elliott (a former MoJo fellow!) credits right-wing blogger Pam Geller with launching the "Ground Zero Mosque" controversy that finally ensnared Barack Obama this weekend:

A group of progressive Muslim-Americans plans to build an Islamic community center two and a half blocks from ground zero in lower Manhattan. They have had a mosque in the same neighborhood for many years. There's another mosque two blocks away from the site. City officials support the project. Muslims have been praying at the Pentagon, the other building hit on Sept. 11, for many years.

In short, there is no good reason that the Cordoba House project should have been a major national news story, let alone controversy.... To a remarkable extent, a Salon review of the origins of the story found, the controversy was kicked up and driven by Pamela Geller, a right-wing, viciously anti-Muslim, conspiracy-mongering blogger, whose sinister portrayal of the project was embraced by Rupert Murdoch's New York Post.

Justin mentions that Geller once suggested that Malcolm X was President Obama's "real" father. But she's also been involved in a more recent episode of Obama/Muslim rumormongering. Here's MediaMatters on June 16:

A year and a half into Obama's presidency, the far-right ranks of right-wing insanity—apparently undaunted by repeated failure—are still desperately trying to prove that he's a secret Muslim.

This time, it's G. Gordon Liddy and Pamela Geller, pushing a dubiously-sourced claim that President Obama admitted to Egyptian Foreign Minister Ahmed Aboul Gheit that he is a Muslim.

Liddy opened up his radio show on June 14 by reading directly from Geller's blog post on the topic, calling it "breaking news" and stating that it comes under the heading "suspicions confirmed."

Geller—a prime distorter of anything and everything related to Islam—wrote on her blog:

Egyptian Foreign Minister Ahmed Aboul Gheit said he had a one-on-one meeting with Obama, in which President Obama told him that he was still a Muslim, the son of a Muslim father, the stepson of Muslim stepfather, that his half brothers in Kenya are Muslims, and that he was sympathetic towards the Muslim agenda. [bolding in original]

To top it off, Geller went ahead and threw the words "I am a Muslim" in quotation marks and attributed the statement to Obama in the title of her post.

As you might imagine, this is total nonsense. The source for Geller's claim—and I am not making this up—is a blogger who says his wife saw the Egyptian Foreign Minister on television saying that Obama told him he was a Muslim. Yet these are the kinds of people who the President decided to empower when he "clarified" his "mosque" remarks on Saturday, explaining that he "was not commenting and...will not comment on the wisdom of making the decision to put a mosque there." Breaking news, Mr. President: you just did.

Well, it worked. Since late spring, the right wing has been harping on the Cordoba House project, a proposed Muslim cultural center (not a mosque; a cultural center with some worship space) that would occupy a building two blocks from Ground Zero in downtown Manhattan. Conservatives were certainly hoping the story would grab the public's attention (and hurt liberals), but most national Democrats refrained from addressing the issue for most of the summer.

A few weeks ago, the right's gambit seemed to have failed. The controversy was finally petering out: New York Mayor Michael Bloomberg gave an impassioned defense of the project and a local board allowed it to move forward. Unlike the Cambridge police vs. Henry Louis Gates incident, it seemed as if we'd make it through this fraught controversy without President Barack Obama feeling like he had to weigh in on local issues.

It may be hard to believe in the 24/7 news cycle, when every little cable news hit seems like a crisis the White House needs to respond to, but some manufactured controversies are better off ignored. You see, when the President speaks on an issue, the political stakes (and media attention) immediately skyrocket. By addressing an issue, the president gives his stamp of approval to the political debate on it. Unfortunately, those of us who were hoping that the White House would steer clear of this particularly stupid controversy saw our hopes dashed on Friday, when Obama offered an eloquent defense of the mosque project. Things got even worse the next day, when Obama rushed to "clarify" his remarks. "I was not commenting and I will not comment on the wisdom of making the decision to put a mosque there," he said Saturday. 

This is the sign of a White House that is lost. If you're going to (unnecessarily) wade into an issue as fraught as the "mosque" controversy, you should really have your story straight the first time around. Politico's Ben Smith nailed it on Saturday:

The signal Obama sent with his rhetoric [Friday] wasn't that he had chosen to make a trivial, legal point about the First Amendment. He chose to make headlines in support of the mosque project, and he won't be able to walk them back now with this sprinkling of doubt. All he'll do is frustrate some of the people who so eagerly welcomed his words [Friday] as a return to form. [emphasis added]

Obama chose to weigh in on this. God only knows why, if he was just going to back off his position the next day. He's on the wrong side of the numbers: Americans are terrified of Muslims, and have opposed mosques in communities across the country (not just lower Manhattan). The GOP will undoubtedly make political hay out of the issue. John Boehner, the House minority leader, found Obama's statement "deeply troubling," and you can bet that Republicans will be pointing to it in campaign ads and stump speeches all the way through November.

But Obama chose to weigh in despite the risks. If you're going to stand on principle, you should actually stand on principle. Instead, with his "clarification" on Saturday, Obama decided to endorse a right-wing frame of the issue. Saying that you believe that the organizers of the Corboda House project have the right to build where they wish isn't saying anything at all. It's simply stating the obvious. Of course they have the legal right to build. By drawing a contrast between the organizers' legal rights and the "wisdom" of the project, Obama is leaving a huge opening for right-wingers. And here, right on cue, is RedState's Erick Erickson, diving through it:

There is, in fact, a difference between the exertion of a legal right and supporting the use of a legal right that is offensive.

Matt Yglesias kind of gets this:

[O]ver the weekend some kind of hair-splitting distinction opened up between the idea of publicly and forcefully acknowledging the legal and constitutional right of the organizers to place their community center at 51 Park Place in Lower Manhattan and supporting construction of the mosque.... [W]hen it comes to matters of religion, I think this distinction gets a bit confusing.... [You] don’t expect Jews to stand up and applaud the construction of new Mormon temples, but I do expect them to acknowledge the right of Mormons to build temples and to stand up to demagogues who would try to abridge that right. And this is what we have going on in Lower Manhattan today. A completely legitimate undertaking that’s being stymied out of a mixture of geographical ignorance, a slanderous attribution of collective responsibility for 9/11 to all Muslims, and political opportunism. On the other side are people standing up for non-discrimination and religious freedom.

There's no real need to introduce dozens of new layers of nuance into it. 

But he misses the key point: Barack Obama is responsible for opening up that "hair splitting distinction" and introducing (or at least endorsing) all those useless "new layers of nuance." Anyway, I'll leave you with this, from Josh Barro at NRO:

And this brings us to why I disagree not only with those who would use the power of government to stop the mosque, but also with the [National Review] editors and others who urge private anti-mosque action. In general, my presumption is that it’s OK for people to build what they want on their property, with the burden on opponents to show why that’s such a bad thing. The proper question is not "Why here?" but "Why not here?"

Read the whole thing.

As more parts of health care reform are put into place, it's become clear that there's going to be a growing gap between states that have the political will to scrutinize insurance companies and protect consumers—and those that don't. In the New York Times, Robert Pear explains how some states still don't have the legal authority to enforce the new consumer protection rules set to go in effect next month.

Thirteen states, for example, don't have the authority to review "unreasonable" insurance rate increases, which will be scrutinized under the new law. Consumer advocates say that such new laws will protect consumers who've been the victims of price-gouging by insurers like the much maligned Anthem, a WellPoint subsidiary that provoked a popular backlash after proposing a 39 percent rate hike this year.

But while some state regulators are planning to ask state legislators to pass laws that would allow them to insurers in line, others are more complacent. Arizona is one example, Pear points out:

Arizona said it was unlikely to pass legislation authorizing any state agency to enforce federal insurance standards, in view of its participation in a lawsuit challenging the federal law. Moreover, it said, Gov. Jan Brewer has “instituted an indefinite rule-making moratorium, so we have no plans to adopt rules related to enforcement” of the law.

Contrast this approach with a state like New York, which has historically been more aggressive about holding insurers' feet to the fire:

Gov. David A. Paterson of New York said his state would require insurers to rewrite their contracts to include the new consumer protections. State officials have developed model language. In addition, Mr. Paterson said, the Legislature will consider amending state insurance laws so they “meet or exceed” federal requirements.