Last night’s GOP debate in Michigan focused primarily on the economy, and for the first time, the Republican presidential candidates spent ample time talking about America’s housing crisis, one of the biggest drags on the country’s economic recovery. Few of the candidates had broached the subject before, and when they did, the results were often disastrous, like when former Massachusetts Gov. Mitt Romney (R) insisted that the government should not try to prevent foreclosures and allow the housing market to “hit bottom.”
That answer earned Romney a strong rebuke from Nevada Gov. Brian Sandoval (R), who oversees the state with the highest foreclosure rate in the nation. Romney “didn’t fully understand what was going on in the state of Nevada,” Sandoval said, adding that the GOP candidates should examine Nevada’s process, which requires mortgage mediation.
As the debate moderators noted, American homes have lost $7 trillion in value in five years, four million Americans are either behind on their payments or in foreclosure, and a quarter of the nation’s homeowners are underwater. The Republican candidates, however, ignored Sandoval’s advice and paid no attention to those facts, choosing instead to offer no substantive solutions to questions about the housing crisis. ThinkProgress compiled a video of the candidates’ answers, including this exchange between Romney and CNBC senior economic reporter Steve Liesman:
LIESMAN: Governor Romney, we have created 2.7 million jobs since February, 2010. Over that period of time, the housing market has continued to decline. We are at 2003 price levels now.
LIESMAN: If we keep going the way we are going, in four or five years, we’ll be at 1999 price levels. The $7 trillion figure that Maria mentioned could almost double. Are you willing to let that happen in America?
ROMNEY: And exactly what would you do instead? Would you decide to have –
LIESMAN: I’m asking you.
ROMNEY: … well, to have the federal government go out and buy all the homes in America? That’s not going to happen in this country. Markets work. When you have government play its heavy hand, markets blow up and people get hurt. And the reason we have the housing crises we have is that the federal government played too heavy a role in our markets. The federal government came in with Fannie Mae and Freddie Mac, and Barney Frank and Chris Dodd told banks they had to give loans to people who couldn’t afford to pay them back.
Letting the market work, however, has only created further drags on the American economy. Foreclosures drag down home values for entire neighborhoods, and according to a study highlighted by the Roosevelt Institute’s Mike Konczal, “foreclosures were responsible for 15% to 30% of the decline in residential investment from 2007 to 2009 and 20% to 40% of the decline in auto sales over the same period.” Letting the market work has also led to rampant fraud from financial institutions that use robo-signing and fake notarization to speed the foreclosure process.
By trying to pin the blame on the Dodd-Frank financial reform law and Fannie Mae and Freddie Mac, the candidates are also ignoring basic facts. Fannie and Freddie, to be sure, made mistakes, but it was the private loan industry that triggered the housing crisis. More than 84 percent of subprime loans were issued by private-sector firms, and nearly 83 percent of subprime loans issued to middle- and low-income borrowers were financed by the private loan industry. Wall Street banks then divided up those loans and spread them around the globe, leading to the worldwide financial crisis of 2008.
If anything, the entire Republican platform on how to fix the economy was summed up in the five minutes its presidential candidates spent discussing the housing crisis last night. Instead of acknowledging and addressing clearly-stated facts, the GOP continues to pander to its base with ideas that wouldn’t pass muster in a freshman economics class.