David Dayen’s 20 questions for Obama

David Dayen, a frighteningly intelligent individual and one of the netroots’ resident experts on mortgage fraud and housing policy, has 20 questions about President Obama’s agenda on housing policy. They’re all notable and excellent, yes, but allow me to highlight a few for your erudition:

5. Why do you continually distinguish between what you call “responsible” and “irresponsible” homeowners (your fact sheet on the second-term housing agenda references “responsible” borrowers 10 times)? Do you use the same language to single out “irresponsible” welfare or food stamp recipients or natural disaster victims? Isn’t it the job of the lender to check a borrower’s credit-worthiness, and subsequently how “responsible” their decision is to take out the loan? Haven’t banks admitted to preying on communities with low incomes and poor financial literacy, steering them into risky, higher-cost loans? Why aren’t you talking about “irresponsible” banks?

6. Your Consumer Financial Protection Bureau says that banks are still steering borrowers into riskier, higher-cost loans. How is this still happening?

Lending is supposed to entail risk. Lenders, consequently, are expected to be judicious when issuing loans. And yet, if the government chooses to only protect “responsible” borrowers, what motivation do lenders have to fix the problem that got us into this mess in the first place?

Of course, coming last but no less valuable is question 20:

20. Ultimately, your plan would preserve the 30-year fixed-rate mortgage, and what economist Adam Posen calls “the cult of homeownership.” Should we rethink the value of homeownership as a wealth-building tool, because it burdens Americans with more risks than rewards, and because new research shows that rises in homeownership accompany rises in the unemployment rate? Should we reconsider ways in which we subsidize homeownership, like with the mortgage interest deduction? Should we provide incentives for saving that aren’t tied up in volatile home equity?

This brings me to the reasons why I’m here. As you may know, Mister Anderson, the building of wealth can be done in two ways: by increasing wages, or by inflating assets. If the objective is, as we claim, to rebuild and preserve the middle class, should we not focus on increasing stable wages, rather than pretend that wealth is being built on paper through risky fluctuations in housing asset prices? Was it not this very system that led us to collapse in the first place? And even if we agree to use housing asset inflation as a wealth-building tool, why not focus on fixing the systematic abuses by the housing finance industry first?

Many questions, and few answers.