Shaun Donovan, Refinancing, and the 900 lb. Gorilla

After I wrote my little letter to the President, I wondered what kind of response I would get and perhaps more importantly, whether my message would reach its intended audience….if any.

Well the response to the blog, from my clients and from my blog readers, was instantaneous. Clearly I’m not alone in my thinking.

I may not have received an audience with the President, but I did get to speak with one of his key housing advisers.

Thanks to a last-minute invite from my friend, Congresswoman Debbie Wasserman-Schultz, I was invited to participate in a roundtable led by Shaun Donovan, the Secretary for the Department of Housing and Urban Development.

Most of the people who were there are very involved with HUD, which I am not. I’m pretty sure I was the only private sector person there and I was definitely the only attorney.

There was a universal sentiment among the panel, that they were having trouble getting business done because the banks are not cooperating with them.

I heard time and time again that the banks were not being competitive with one another and further, they are not being compliant. Sounds familiar doesn’t it?

During the meeting, I was able to directly address Secretary Donovan. Up until that point he had talked a great deal about refinancing, about the need to push Congress to pass several bills that he and the President feel will help the housing market. But he hadn’t addressed the 900 lb. gorilla in the room… the banks.

I spent several minutes telling the Housing Secretary the opinions that I have shared here countless times. And when it was all said and done, to his credit, he did not disagree with me.

The good news is that I came away with the idea that Secretary Donovan, his constituents at HUD, and many in D.C. at the least understand the disruption that the banks in their current state bring to the marketplace.

He knows the banks have too much power. He said he knows it, and the cabinet knows it too.

But the question is now, what will he do about it?

Honestly I don’t know. I know the government can’t fix the banks overnight. But too much time has been wasted trying to clear the weeds when the government should be starting a controlled burn.

As I listened to the Housing Secretary Donovan, I felt like Bart during the opening credits of “The Simpsons”, because I kept writing, “The banks are not competitive. The banks are not competitive.” They don’t have to be. If they want to add in their own refinancing requirements, even if they fly in the face of every alphabet-soup program Obama is pushing, they are doing that.

So unless ending Too Big To Fail becomes the President’s number one concern, we will be doing this same song and dance next year.

Now the Housing Secretary said that the Obama administration inherited much of these problems caused by the banks, and that is true.

But it did become a crisis under the President’s watch. And I have to disagree with Secretary Donovan that it’s up to Congress to change things.

You won’t need Congress to pass new refinancing rules if the 5 big banks were instead 20 or 30 more manageable ones. And besides that, if and when the banks are broken up, you will see not only more competition, but also better products and healthier loans.

There is nothing wrong with creative destruction, and our economic history is laden with that.

If you happen to be reading this blog on an iPad, or an Android phone, take a look at it. Do you really think you’d have wi-fi, or cell phones that are as powerful as some computers, had the Ma Bell companies not been broken up?

I am hoping that the Secretary will go back into an all-hands Cabinet meeting and put pressure on the Justice Department, so that they will do do their jobs concerning the antitrust and anti-competitive practices of the banks.

That is what Roosevelt, Truman, and Kennedy would have done had they faced the same problems. Then they would have stepped out of the way and let America do what it does best.

When I suggested that, I got some looks from the room as if I was some hard core conservative, until they realized I was just a man trying to talk common sense.

I was a Clinton delegate many years ago, and yes, I voted for President Obama, so it’s not very often I get mistaken for a Republican. But these days it’s OK with me.

In reality, I believe my ideas transcend either political party. Unfortunately, both parties have been at times co-opted by too many special interests…particularly the banks. Take a look at last week’s Jamie Dimon dog-and-pony show if you don’t believe me.

But I am optimistic, for as I spoke with the secretary’s advisers after the roundtable, they all said they could not agree with me more.

So maybe, just maybe, there’s hope for us yet.

In The Trenches,

Roy Oppenheim