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Cerberus Descends into the Right Wing Underworld

Ezra Klein Joins the "Macro Policy Through Mortgage Refinance" Caucus

Yes, a big thing the Obama Administration could do to boost the economy.

If I were running the Obama Administration right now?

I would immediately recess-appoint Joe Gagnon to be Director of FHFA. I would tell him to expand the portfolios of Fannie Mae and Freddie Mac by offering everybody in the country a refi of their current consolidated home equity and mortgage principal balance at the conforming mortgage rate--with an appropriate shared-appreciation kicker if the resulting loan amount is not "conforming", paying due attention not just to credit-market efficiency but to microeconomic externalities.

Ezra Klein:

Mass refinancing: The ‘biggest thing’ Obama can do without Congress: From 2001 to 2003, Glenn Hubbard served as President George W. Bush’s chief economist…. [R]ight now, the candidate who could most benefit from his advice is President Obama. Hubbard is an advocate for using Fannie Mae and Freddie Mac to set off a nationwide wave of mortgage refinancing. In a paper co-authored with Columbia economist Christopher Mayer, Hubbard estimates that more than 75 percent of the homeowners with 30-year mortgages backed by Fannie or Freddie are paying interest rates higher than 5 percent. But for the past two years, interest rates have been closer to 4 percent. That means tens of millions of Americans are paying more than they need to every single month…. Those homeowners represent one of the president’s few remaining opportunities to help a substantial number of Americans…. In recent months, the White House has come to an overdue realization: Republicans in Congress will not… work with them on anything big…. This has led to the “we can’t wait” campaign, in which the president maximizes his executive authority to make changes….

A… promising avenue for an impatient administration is to recess-appoint a new director of the Federal Housing Finance Authority — the body that oversees Fannie Mae and Freddie Mac. The FHFA is led by Edward DeMarco, a career civil servant who became acting director when James Lockhart, Bush’s pick, stepped down early in Obama’s term. DeMarco is respected by both sides of the aisle, but he has opposed many of the Obama administration’s efforts to use Fannie and Freddie to help the ailing housing system. The Obama administration waited until late 2010 to nominate its own candidate to lead Fannie and Freddie…. Since then, the Obama administration has worked to move DeMarco in its direction, and achieved some notable successes. But in a white paper released last week, the Federal Reserve echoed the consensus of many housing experts in finding that much could still be done if the authority could be convinced to interpret its mandate more broadly. “Actions that cause greater losses to be sustained by [Fannie and Freddie] in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery,” the Fed wrote….

Joe Gagnon, a senior fellow at the Peterson Institute for International Economics, [writes:] “this is the single biggest thing the president can do without a vote in Congress. It’s a no-brainer. It’s been a no-brainer for years.”

So isn’t it time to stop waiting?

Failing a recess-appointment of Joe Gagnon to head FHFA, what would I do?

Well, I would fast-track nominate Glenn Hubbard to be Director of FHFA.

I would then send Glenn around to the Republican senators telling them: "Look. Confirm me immediately. I'm a Republican--and a partisan one--and the current political-year benefits from this are shared between Obama and my candidate for President, Romney, and the benefits from this in terms of recovered housing construction and lower nationwide unemployment won't show up until next year, when we can all credit them to President Romney."