Republican appointees at Freddie Mac, the government-sponsored mortgage giant, resisted mortgage programs aimed at helping homeowners and alleviating the nationwide housing crisis because they feared the programs were an effort at “backdoor economic stimulus,” according to sources who spoke to ProPublica.
After the Obama administration instituted the Home Affordable Refinancing Program (HARP) to help homeowners refinance their mortgages at lower interest rates, Freddie Mac placed heavy restrictions on the program out of fear that it would hurt the company’s bottom line and its ability to repay taxpayers. But two Republican appointees and one executive also held back the program, ProPublica’s Jesse Eisenger reports, because they thought it would help the economy under a Democratic president:
In closed door meetings, two Republican-leaning board members and at least one executive resisted a mass refi policy for an additional reason, according to the interviews: They regarded it as a backdoor economic stimulus. [...]
Robert Glauber, who left Freddie’s board in March, contended in board meetings that aspects of the refinancing program were “designed to be a stimulus” for the economy, said John Koskinen, who served as Freddie Mac’s chairman from 2008 to 2011, during which time he also served briefly as its interim chief executive.
Glauber, director Linda Bammann and head of risk management Paige Wisdom resisted mass refis. One executive viewed their objections as colored by partisan unwillingness to help the economy recover, something that would benefit President Obama.
Glauber, a George H.W. Bush appointee who previously worked on Wall Street, and a former chief executive disputed the idea that opposition to the program was partisan in nature.
Whether the program would have been stimulative in nature is unquestionable. In fact, helping homeowners and reducing the drag of a slumping housing market was precisely the point of HARP and other mortgage programs. Columbia University housing economist Christopher Meyer told ProPublica that more aggressive programs by Freddie Mac and Fannie Mae, the other government mortgage giant, could have saved homeowners $75 billion in interest payments and prevented an untold number of foreclosures. Instead, Freddie Mac has only recently loosened the tight restrictions it placed on the refinancing program.