A growing movement calling for the firing of Obama administration Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco gained steam this week, as progressive activists interrupted DeMarco’s remarks at a congressional hearing with a disruptive protest, and Democratic state attorneys general sent a sharply-worded letter to President Barack Obama petitioning for DeMarco’s removal from office.
DeMarco, whose agency acts as the conservator of government-sponsored lending giants Fannie Mae and Freddie Mac, firmly opposes initiatives to enact principal reduction — a process by which housing mortgages are reset to fair-market value — on Fannie and Freddie housing loans.
A popular theory in the progressive movement in the aftermath of the 2008 financial collapse, principal reduction has been criticized for its potential to burden taxpayers. A January 2012 FHFA report cited “estimates that principal forgiveness for all of these mortgages would require funding of almost $100 billion to pay down mortgages to the value of the homes securing them.”
“This is not about some huge difference-making program that will rescue the housing market. It is a debate about which tools, at the margin, better balance two goals: maximizing assistance to several hundred thousand homeowners while minimizing further cost to all other homeowners and taxpayers,” DeMarco said in his remarks at an April 2012 Brookings Institution event, at which he strongly opposed principal reduction.
The opposition to DeMarco, who was appointed to a deputy post at FHFA by President George W. Bush in 2008 and was designated acting director by Obama in August 2009, highlights a rift between the Obama administration and the progressive movement, and reveals one of the administration’s acknowledged political liabilities.
Activists from the pro-principal reduction coalition New Bottom Line created a stir Tuesday at a House committee on Housing Finance, holding signs and interrupting DeMarco’s remarks to the committee until they were ordered out of the room. “Dump DeMarco,” the protesters shouted, one by one, as the committee suspended in response to each new disruption.
“This hasn’t been a point of leadership from the Obama administration,” an official from the Alliance for a Just Society, which is a member of the New Bottom Line Coalition, told The Daily Caller. “All of the policies that they’ve brought forward have been too little, too late. Replacing DeMarco would be a big step forward.”
New Bottom Line is a coalition comprised of the affiliates of well-funded major progressive groups PICO National Network, Alliance for a Just Society, National People’s Action, and Right to the City.
New Bottom Line’s efforts in starting the “Dump DeMarco” movement began three years ago, and gained ground slowly.
“We knew that we couldn’t get to widespread principal reduction unless Fannie and Freddie do it,” the Alliance for a Just Society official said. “After a while, it became clear that we had more of a mainstream message, when some lawmakers and some non-controversial regulators brought up as a solution.”
Nine state attorneys general, led by Democrats Eric T. Schneiderman of New York and Martha Coakley of Massachusetts, sent a letter to Obama this week urging the president to replace DeMarco and allow for principal reduction.
“Under the leadership of Acting FHFA Director Edward DeMarco, Fannie Mae and Freddie Mac remain an obstacle to progress by refusing to adopt policies that will help maximize relief for struggling homeowners,” Schneiderman said.
Michigan Democratic Sen. Debbie Stabenow also joined a growing number of House Democrats last Friday in stating that DeMarco should be replaced.
The White House made it known that it was interested in replacing DeMarco in December 2012, according to a Wall Street Journal article that cited “people familiar with the discussions” as a source. White House officials previously told the Financial Times in October 2012 that they were looking to replace DeMarco.
DeMarco can be replaced by an Obama recess appointment.