They Go or Obama Goes

Barack Obama and the Democrats he led to a
stunning victory two years ago are going down hard in the face of an
economic crisis that he did nothing to create but which he has failed to
solve. That is somewhat unfair because the basic blame belongs to his
predecessors, Bill Clinton and George W. Bush, who let the bulls of Wall
Street run wild in the streets where ordinary folks lived. And there
was universal Republican support in Congress for the radical
deregulation of the financial industry that produced this debacle.

The core issue for the economy is the
continued cost of a housing bubble made possible only after what Clinton
Treasury Secretary Lawrence Summers back then trumpeted as necessary
"legal certainty" was provided to derivative packages made up of suspect
Alt-A and subprime mortgages. It was the Commodity Futures
Modernization Act, which Senate Republican Phil Gramm drafted and which
Clinton signed into law, that made legal the trafficking in packages of
dubious home mortgages. In any decent society the creation of such
untenable mortgages and the securitization of risk irrationally
associated with it would have been judged a criminal scam. But no such
judgment was possible because thanks to Wall Street's sway under Clinton
and Bush the bankers got to rewrite the laws to sanction their
treachery.

It is Obama's continued deference to the
sensibilities of the financiers and his relative indifference to the
suffering of ordinary people that threaten his legacy, not to mention
the nation's economic well-being. There have been more than 300,000
foreclosure filings every single month that Obama has been president,
and as The New York Times editorialized, "Unfortunately, there is no
evidence that the Obama administration's efforts to address the
foreclosure problem will make an appreciable dent." The Times noted that
the administration's main program has been a bust, with only $321
million of the $30 billion allocated to the program having been spent to
help folks stay in their homes.

The ugly reality that only 398,198
mortgages have been modified to make the payments more reasonable can be
traced to the program being based on the hope that the banks would do
the right thing. While Obama continued the Bush practice of showering
the banks with bailout money, he did not demand a moratorium on
foreclosures or call for increasing the power of bankruptcy courts to
force the banks, which created the problem, to now help distressed
homeowners.

The subject of housing foreclosures is
inherently boring unless you happen to own a home being foreclosed, in
which case your family's life has just been turned disastrously upside
down. But few of the well-paid pundits on television are in such a
position, and as a result the tragedy that has hit 4 million families in
the past two years has received scant notice.

But even that highly privileged group of commentators must now be aware
that those foreclosures are behind Tuesday's news that U.S. home sales
reached their lowest point in 15 years and that there is unlikely to be
an economic recovery without a dramatic turnabout in the housing market.
The stock market tanked Tuesday on reports that U.S. home sales had
dropped 25.5 percent below the year-ago level.

When homes are foreclosed in a neighborhood
the equity of those in the area who have faithfully paid their
mortgages is slashed. And when the banks dump those foreclosed
properties back on the market, prices drop even lower. Yet the
administration has offered the most tepid of responses to stanch the
fierce bleeding of home equity worth. A paltry $4.1 billion has been
committed to efforts by the states to help the unemployed and other
distressed borrowers stay in their homes. Compare that with the
trillions spent on making the financial industry super-profitable once
again.

There is no way that Obama can begin to
seriously reverse this course without shedding the economic team led by
the Clinton-era "experts" like Summers and Treasury Secretary Timothy
Geithner who got us into this mess in the first place. They are spooked
by one overwhelmingly crippling idea-don't rattle the financial titans
whom we must rely on for investment. But when it comes to keeping people
in their homes, it is precisely the big banks that must be rattled into
doing the right thing.

Obama gained credibility through sacking
Gen. Stanley McChrystal for making untoward remarks. Why not sack
Summers and Geithner for untoward policies that have inflicted such
misery on the general public?

Click here
to check out Robert Scheer's new book, "The Great American Stickup: How
Reagan Republicans and Clinton Democrats Enriched Wall Street While
Mugging Main Street."