Photo: (AP Photo/Pablo Martinez Monsivais)
The FT’s Shahien Nasiripour reports the Obama Administration is seeking to oust Ed DeMarco if the president is reelected.Who is Ed DeMarco? He’s the head of the Federal Housing Finance Agency.
And many say he has single-handedly held back the U.S. economy by refusing to offer debt relief to troubled homeowners.
The New York Times’ Paul Krugman called for DeMarco’s head this summer, saying it was not the FHFA director’s job to decide federal policy.
Krugman explained why offering relief to homeowners is so crucial for an economic recovery:
Loosely speaking, excess debt has created a situation in which everyone is trying to spend less than their income. Since this is collectively impossible — my spending is your income, and your spending is my income — the result is a persistently depressed economy.
Krugman also critiqued DeMarco’s rationale for rejecting the policy:
Mr. DeMarco’s letter rejecting the relief plan made remarkably weak arguments. He claimed that the plan, while improving his agency’s financial position thanks to subsidies from the Treasury Department, would be a net loss to taxpayers — a conclusion not supported by his own staff’s analysis, which showed a net gain.
Felix Salmon has also called DeMarco an “obstructionist.”
And even Bruce Krasting, he notionally agrees with DeMarco, admits the cost of the move would be relatively small:
Assuming the average size is $250k, and being under water by 30%, the cost of the write-downs would be $250 billion. That’s massive. But we spent $900b on the banks, the Iraq – Afghanistan wars have cost $1.5 Trillion, spending of Social Security will top $700B this year. The one time charge on ~60% of all underwater mortgages is not so big compared to those other numbers.
Nasiripour says the administration would seek to boot DeMarco in a recess-appointment manoeuvre.