Newt Gingrich Is Why America Can't Have Nice Things

Newt Gingrich And Julian Castro Explain Why America Can't Have Nice Things

WASHINGTON -- There's something disconcerting about watching Newt Gingrich take the stage to deliver a policy speech in 2014.

To most Americans, Gingrich is a charming curiosity: His latest stint with public relevancy was a quixotic 2012 presidential bid in which he visited many of the nation's finest zoos and advocated the establishment of lunar colonies.*

But on another level, Gingrich's Tuesday speech on housing before the Bipartisan Policy Center epitomizes the soft corruption of Washington elites at their worst.

As Speaker of the House in 1995, Gingrich opted to shut down the federal government rather than cut a budget deal with President Bill Clinton. He defended Fannie Mae and Freddie Mac in Congress, and after leaving Capitol Hill received more than $1.6 million in consulting fees for Freddie -- during years in which the mortgage giant took on heavy risks that ended with a government rescue. In Tuesday's speech, Gingrich had the audacity to warn about the dangers of too-big-to-fail institutions backed by government guarantees -- and not one person in the auditorium at the Washington Renaissance Hotel dared to cry foul in his presence.

How does such a man become an expert on either bipartisanship or housing? The unfortunate answer is the third silent partner in the contemporary Beltway understanding of bipartisanship: corporate America.

When Washington talking heads discuss "bipartisanship," they often avoid topics about which many Republicans and Democrats in Congress actually agree. You won't hear them extoll the virtues of publicly auditing the Federal Reserve, or of prosecuting bank executives for misconduct that created the financial crisis, for instance. But you will hear plenty of calls for lowering corporate taxes or privatizing public assets.

Gingrich was full of these ideas on Tuesday. After touting French President Francois Hollande's weak approval ratings, the existence of 3-D printed cars, ATMs in multiple languages, cell phones equipped with GPS mapping, Uber and AirBnB, he eventually got down to business: He called for more oil and gas exploration (fracking), lower corporate taxes and turning over the core operations of Fannie Mae and Freddie Mac to the financial sector.

"You want to get as much of this away from politics as you can," said Gingrich, a career politician and political consultant to the mortgage market.

He wasn't alone. Housing and Urban Development Secretary Julian Castro praised a (bipartisan) Senate bill that would feed the fruits of Fannie and Freddie to the nation's largest financial firms.

"A government-dominated market is unsustainable," Castro said. "The bipartisan passage of Johnson-Crapo in the Senate Banking Committee was a huge step forward."

In truth, the problems in the U.S. housing market aren't very complex. But solving them involves holding very big banks accountable for some very bad things. And most so-called bipartisan groups earn their centrist gold stars by aiding big corporations, or at least by leaving them alone when they do wrong.

Wall Street banks broke the housing market, and both Congress and the Obama administration have refused to fix it. Evidence of robosigning -- banks forging signatures and fabricating documents in order to pursue foreclosures -- persisted for years after the government reached multiple big-ticket settlements to eliminate the scourge. "Zombie foreclosures" -- when a bank evicts a borrower but then opts not to actually take ownership of the house, creating huge billing problems for homeowners and local taxes -- have sparked a rash of blighted properties across the nation. There's even a new problem with "robo-testifiers" -- people who masquerade as expert witnesses for banks on foreclosures about which they have no knowledge.

That mess creates a lot of legal uncertainty. Private-sector investors don't want to get tied up with mortgage risk, because they simply don't trust the banks. And young people who used to buy houses can't afford to invest thanks to elevated unemployment and weak wages created by the financial crisis.

But you wouldn't know any of this from the Bipartisan Policy Center's two-day housing conference. Four panels and speeches were explicitly devoted to the future of housing finance reform -- insider code for "how to privatize Fannie Mae and Freddie Mac." Another panel was devoted to jumpstarting the private sector's role in housing finance -- basically the same thing. The rest was, well ... there was a panel titled, "Can Millennials Save The Housing Market?" and another panel featuring a discussion between James Carville and Mary Matalin, which might have been Beltway-edgy in 1996.

The focus on how to turn Fannie Mae and Freddie Mac over to Wall Street obscures the fact that things are going relatively well at the mortgage giants these days. Sure, they cover most of the mortgage market and put taxpayers on the hook for potential losses. But in contrast to the subprime heyday, they also present taxpayers with all of the upside on mortgages they support. So far, profits have been pretty good.

The only real trouble is a 2012 Treasury Department decision that almost all profits from Fannie and Freddie have to be swept into the general fund of the U.S. government. That prevents the firms from building up a capital base that could allow some leniency on mortgage standards to let more people into the market -- if that is, in fact, needed. Elevated joblessness, stagnant wages and increasing economic inequality may well be the ultimate culprits, rather than loan approval standards.

But if Fannie and Freddie's guidelines are really locking out too many borrowers, the trauma is easily treated. The executive branch can simply reverse its profit sweep ruling, letting the firms build up capital and relax their standards without any bipartisan negotiation.

But "Why Doesn't Obama fix it?" isn't very bipartisan, and Gingrich is a Republican. And in truth, the Gingrich speech wasn't totally devoid of policy substance. He did, despite his own history, warn about the dangers of too-big-to-fail banks and the economic drag of elevated student debt levels.

"If you're serious about helping the next generation involved in housing, you have got to look at the student loan disaster," Gingrich said. "This is the next big crushing disaster coming down the road."

Indeed, Americans now shoulder more than $1 trillion in student debt amid declining wages.

But Gingrich didn't suggest any policy to combat either too-big-to-fail or the student loan crisis. Instead, he offered vague platitudes, which were eagerly devoured by an auditorium packed with the gray-bearded frumps and well-heeled young lobbyists who make up the rapidly expanding Bipartisan Industrial Complex.

"We ought to try figure out how we have an honest national conversation," Gingrich said. "And by 'national,' I mean at the level of the Congress and the elites in this city."

*This was actually a pretty good idea. Gingrich also pressed for colonies on Mars, although the existing literature suggests that these would quickly become leftist hotbeds.

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