Increasingly, President Obama is being attacked by progressives for a perceived failure to take bold, decisive action. A good example of this was a Monday blog post from progressive economist and New York Times columnist Paul Krugman:
continued, after the fold...
In today’s report on the foreclosure mess, a revealing sentence:
As the foreclosure abuses have come to light, the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.
Surely this can serve as a generic statement:
As NAME ISSUE HERE has come to light, the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.
Stimulus, bank rescue, China, foreclosure; it applies all along. At each point there were arguments for not acting; but the cumulative effect has been drift, and a looming catastrophe in the midterms.
Following Krugman's link, we find a New York Times article which outlines the grievance, and learn of the progressive-approved "bold" response that did not happen-- a nationwide foreclosure moratorium. Instead of supporting the "bold" option, members of the Obama administration such as David Axelrod and HUD Secretary Shaun Donovan were publicly saying that foreclosures should be allowed to go forward, and in Donovan's case, that a foreclosure moratorium would do "far more harm than good."
Criticized for lack of boldness, Obama probably simply listened to the best sources of advice he had available-- from people who are in the best position to evaluate the pros and cons of a nationwide foreclosure moratorium. People such as FDIC Chairwoman Sheila Bair, an official whom many progressives have given high marks, despite the fact that she was originally a Bush appointee.
On C-SPAN's "Newsmakers" show on Sunday, Bair disputed the necessity and wisdom of a nationwide foreclosure moratorium, and made the case for foreclosures to move forward after files have been reviewed. Bair acknowledged that the facts of the foreclosure document mess as currently known involve "industrywide practice with the large servicers" and that while these known faulty industry practices such as improperly signed and notarized affidavits are "very unfortunate," they only amount to a "process issue." Bair said that we don't know yet whether there are "substantive issues," and that people should not "jump to conclusions" until reviews have been completed.
Bair urged people to not make more of the process issues than necessary, and expressed a belief that these issues would not cause significant damage to the financial system. "Again, if it turns out that this is just a process issue, then I don't anticipate the exposures to be significant. If this turns out to be something more fundamental, then we will have to deal with that," Bair said. "I don't think that people should be viewing this as a broader problem than it is, until we have the facts."
When asked whether there should be a nationwide foreclosure moratorium, Bair said no. Cases should reviewed and documents such as affidavits should be checked for sufficiency and corrected as needed, but once that has occurred, then foreclosures should proceed. "it's tragic, and I don't like it," Bair said, but made the point that foreclosures were necessary for the market to clear, and that many of the homes in question were vacant anyway.
The fact is that there may be certain areas that would benefit for a foreclosure moratorium. Florida's courts, for instance, are floundering under an unprecedented volume of foreclosures, and there are very real concerns that the courts are failing to deliver justice to homeowners in foreclosure cases in at least some jurisdictions. But why should foreclosures be shut down in, say, North Dakota just because Florida courts are struggling? Clearly, states have the power to halt foreclosures-- Connecticut has done exactly that.
Given that, and the fact that the very laws governing foreclosures vary widely from state to state, would seem to make the decision of whether or not to halt foreclosures a call best left to the states, based on their particular blend of circumstance and law. Notably, the vast majority of states have not decided to halt foreclosures, even though each and every state is aware of and actively investigating the foreclosure mess.
Furthermore, a federal ban on foreclosures would send the wrong message on the very issues of integrity of process and rule of law that ban advocates claim that they stand for. A blanket ban tells businesses who have not used robosigners or engaged in other bad foreclosure practices that their good conduct does not matter-- everyone gets punished the same, regardless of conduct.
Certainly, there exist circumstances so extreme that it is not possible to sort out good from bad before taking action, and it is not always in the best public interest to have policies that put fairness above all else, especially in a crisis situation. But, returning to Bair, we are largely talking about process issues here so far. It is questionable whether there is even a bona fide crisis here, much less a large enough crisis that fairness needs to be abandoned. It is not clear that cases where a homeowner was legitimately damaged by unlawful and/or fraudulent practices by banks and their agents in foreclosure actions cannot be handled by the courts in most jurisdictions. If the courts can handle claims of damages caused by bad bank practices, and if, as Bair believes, the amount of those damages is not so great that it threatens the solvency of the banks, then no real crisis exists.
Boldness has its virtues, but there is also a particular kind of courage in making the right decision, when a supposedly "bolder" or "more forceful" decision might garner more approval. President Obama has made the right decision here in the face of certain criticism and has once again demonstrated the kind of leadership that I can get behind.