You can read the transcript below or listen to the audio version here:
Truthdig: OK, Bob, here goes the first question [from BJW in San Francisco]: How are new mortgages being treated differently now? Are they being packaged, sliced and sold the same way or are they kept with the bank? If we have a recently refinanced mortgage, how will we know if it is put into one of the packages by the lender? Are they required to notify the borrower? Are there some lenders such as Union Bank who were not involved or where can we find a list of lenders who were not involved in this mortgage racket?
Robert Scheer: Well, that’s an important question, and the reality is that it hasn’t changed at all. I mean, there are no real effective new regulations to building accountability. Securitization of mortgages is going on at a rapid rate, and we have no way of really knowing what happens to these mortgages, ’cause they’re allowed to do whatever they want with them. Resell them, slice and dice them, package them, and so forth. And so the quick and easy answer is: No, you have no way of knowing. And you know, you can challenge it, you can demand to have information, but at the end of the day your mortgage may be owned by someone else. And that’s why we needed new rules, and we didn’t get them.
Truthdig: OK, great. Thank you. We have the next question coming up. OK, the next question is: How are new mortgages being treated differently now?
RS: Well, again, they’re not. That’s the problem, that we have not learned from these mistakes. And the really big problem is that 65 million American mortgages are represented by a computer program in Reston, Va., called the MERS program, which is owned by Fannie Mae, Freddie Mac and the top banks. And so when you go into court, you’re really up against a robo-banker, you’re up against a computer system. And that’s why the courts all over the country are throwing cases out, and that’s why 50 attorneys general, Republicans and Democrats, in the states are objecting to the process. We have an amazing crisis now in American homeownership because we turned it over to a computer. The traditional system, where your county government kept track of mortgages, and when ownership changed—you know, let’s say the bank had the mortgage, they were registered as the owner down at the county courthouse, and then if somebody else bought it they had to change that, pay a fee, get a change. And that didn’t lend itself to the securitization of mortgages, treating mortgages as poker chips in the Wall Street casino. And in order to do that, to slice and dice them, and shift them around, and resell them, and sell them and so forth, they had to unhinge them from the system that had worked for centuries, where you knew who the owners were, and as I say it was kept locally. And instead it’s now kept by a computer bank in Reston, Va. And it’s what’s caused this incredible meltdown, and the banks themselves have had to declare a moratorium on foreclosures ’cause they can’t win their cases. So we have a tremendous mess right now.
Truthdig: I agree, we do. OK, we have the next question. This one is from msMonk [in Oakland, Calif.]: I have been enlightened by your writings since the days of Ramparts Magazine … and feel privileged to participate in your discussions. Having lived through the nightmare of renting a foreclosed house and suffering such loss and becoming homeless as a result, I am inquiring about alternatives available to remedy so many people with nowhere to live. Public housing programs are so overburdened that you can’t even get on the waiting list for the wait list. … I am seeing more and more people homestead vacant foreclosed houses, and the banks that own them don’t even care enough to secure them. Is there a way to do this legally because I don’t want to go to jail being a senior (O.G=oldgal)!
RS: Well, you can’t do it on your own. To do it legally, government agencies, whether on the local level or federally, have got to step in and say, you know, we want to help people stay in their houses and if their houses are being abandoned, we want to be able to turn them over to people who need houses in some kind of way. And we’ll subsidize it, and we’ll get the paperwork going. That has … that can be done. I mean, that’s one way of stopping the meltdown. You can’t do it on your own, or you become a squatter. And one of the ironies of this is that the banks will use government to kick you out of a home—they’ll send the marshals—but they object when government will come in and look at the contract and tell you whether you’re defrauded or not, make sure the language is clear. So there’s a double standard. And then let me say something, by the way—Barack Obama has just appointed this guy Tom Donilon to be his national security adviser. And he said, “Donilon has a probing intellect and a remarkable work ethic.” This guy Donilon was the top lawyer at Fannie Mae, from 1999 to 2005 he was their chief lobbyist in Washington, arguing against any government regulation, any government control of this crazy stuff that was being done in the housing market. He’s now… so this guy made an enormous amount of money from the run-up of stock, and he’s rewarded with the most sensitive position in the United States government, being the head of our national security in the White House. And Obama applauds him. And to my mind, it’s a tip-off to not only Obama’s thinking, but that of the whole Democratic establishment. This guy’s wife, Catherine Russell, is chief of staff to Biden’s wife Jill. I mean, you know, these guys … what were they thinking? When they break bread together over dinner, do they talk about the tens of millions of people who are now suffering? We have 50 million people whose homes are … mortgages cost more than the house is worth. We have 10 million people who’ve lost their homes. And yet the guys who did it, they not only aren’t punished in any way, they’re rewarded. And I think this idea of taking this guy who at Fannie Mae was the chief counsel and argued against any kind of government supervision of this, and they’re making him in charge of our national security, tells you really a hell of a lot about Obama and who he listens to. I just find it shocking.
Truthdig: Yeah. OK, thank you, Bob. The next question [from George in Mexico, Maine]: Can you state what you would like to see done to resolve the housing loan crisis? It is estimated by NBC that as many as 20 percent to 40 percent of the loans Fannie and Freddie have on their records are fraudulent.
RS: Yeah, I know what has to happen, since this whole thing began, which is a moratorium on foreclosures. What the banks are doing now, out of necessity, should have been done from the beginning. And it should not be up to the banks to decide; it should have been by the government, rising through the courts and saying this thing is a bloody mess. We don’t know who owns these things; you can’t foreclose on a house if you don’t know who owns it. And they should have stepped in right away at the beginning of this meltdown, and said, hey, while we unravel this, leave people in their homes. Work to empower the bankruptcy courts to force the banks to make deals. Because if you keep people in the homes, the plumbing doesn’t get stolen, the wiring, the windows don’t get broken, boarded up, and the rest of the neighborhood doesn’t suffer. I mean, the people that are suffering here are not just the people who had these lousy loans that then get foreclosed, it’s everybody in their neighborhood. Because if some houses go down, everybody gets hurt, even if you own your own house outright. And so that’s … the collapse of the housing market has affected everyone. And it seems to me very clear what should be done, which is a moratorium, a freeze on foreclosures. Everybody stay put, you know? Musical chairs. Stay put until we can sort this thing out. Whether it takes a year or two years. Sort it out, figure it out, and then compel the banks that have been saved by the taxpayers. You know, Wall Street was saved by the taxpayers, they’re now making record profits, they’re paying out record bonuses, record salaries to their people, the last two years have been their best years in history as far as their payouts. And you say to them, wait a minute, we made you whole; we saved you. You guys created the problem. And in return, you’ve got to now do something back for the homeowners. Instead we’re getting what Paul Volcker—who was head of the Federal Reserve and is actually supposed to be head of the economic advisers to the president, but he’s obviously not listened to—Paul Volcker, just eight or nine days ago, said, “We have a liquidity trap.” We’ve given the banks all this money, and the low interest rate—a zero interest rate, effectively. The Fed has taken over $2 trillion of these toxic assets off the books of the banks. And instead of the banks using all that money that they’re getting for next to nothing and lending it to people, lending it to businesses, investing in the economy, they’re holding onto it. That’s called a liquidity trap. And so the banks are made whole, and they’re not doing anything to help the rest of the people and the economy.
Truthdig: OK. I have another question: Where should the money come from to allow for the foreclosures to freeze?
RS: Where the money should come from is from the banks that have made out like bandits in this whole thing. They contrived these packages. They’re the ones who sold homes, sometimes to people who couldn’t afford it, terms that were not understood. They’re basically the swindlers in this piece. And it’s in their interest, by the way. We’re not asking the banks to do something that’s not in their long-term interest. Because they’re sitting there holding all this toxic paper—the stuff that the Fed hasn’t taken from them. Every time the housing market looks like it might get a little better, they dump this stuff. And then it gets worse again. And so in terms of where the money should come from, it’s in the long-term interest of the banks to make whatever deals they can to keep people in their homes. And if that means lowering the payments, if it means lowering the loan obligations, it’s still better than the home going belly-up. So really what we’re talking about is forcing the banks to act in their own long-term interest by keeping people in their houses as much as they can. And they’re not doing that. They’re being very, very slow to make adjustments in these loans, and as a result the foreclosure rate keeps increasing.
Truthdig: OK. The next question [from Belle]: Why doesn’t the media ever comment on why the government didn’t rescue the actual mortgage holders that were in trouble, versus bailing out the banks?
RS: Because the media is an elite media. We live in a class-driven society now that is quite extreme. And the Washington elite, the pundit class, the people who comment on this stuff—you know, they no longer work at small newspapers. They’re no longer living in regular communities. These people make out like bandits, you know, whether they’re called journalists or they’re called politicians or they’re called bankers. You know, they get enormous … people like Tom Friedman of The New York Times, he gets what, 50, 75, 200,000 dollars for speaking fees—the same thing that Lawrence Summers got when he was advising Obama, [when Summers was] ostensibly a Harvard professor. You know, and he made $4 million in speaking fees while he was advising Obama. So these people are not hurting. The people who edit the big newspapers, who run the big broadcast stations, that are chattering on TV, the politicians that serve them, you know, and of course the bankers behind them—they’re all doing quite well in these rough economic times. It’s the rest of the people that are suffering. And they’re not in touch with that. They don’t care about it, they don’t observe it, it’s not in their face. And as a result, they don’t cover it. They don’t write about it. So we have a crazy society now where we have enormous pain out there, enormous pain. That’s why you have the tea party movement. That’s why you have this rage in the country. And unfortunately, the only people dealing with it are people on the right side of the spectrum—the right-wing side of the spectrum. And we don’t have a progressive populist alternative because too many “progressives,” so called, have sold out to the Obama administration and the Democratic Party leadership. And they’re buying into this thing, “Hey, you know, circle the wagons. We gotta win this election. Let’s just shut up.” You know, the Supreme Court is at stake, it’s social issues, blah blah blah. And meanwhile, they’re letting the whole populist cry be championed by the right wing. And it’s a cynical response on the part of the right wing. They’re getting a lot of corporate money to these tea party things. They’re getting a lot of corporate support for their Republican candidates. And we should remember it was Republicans who initiated this whole radical deregulation. Yes, Bill Clinton signed off on it, and he made it a reality. But the Republicans ever since Ronald Reagan have wanted to take the wraps off, finance wraps off, big business. And that’s what caused this big meltdown, and yet here you’ve got these Republican candidates parading around as if, you know, they’re the real populists. They’re not. They’re faux populists, false populists, and they’re going to betray the people who are trusting them. But we don’t have a progressive populist alternative. We don’t have leading Democrats who are sounding the alarm. And the saddest thing is that the one who comes closest to it, Russ Feingold, the senator from Wisconsin, is in trouble. Here’s a guy who voted against the destruction of Glass-Steagall, he voted against Clinton on radical deregulation, he voted against throwing money at Wall Street on the bailout. And the poor guy’s being held responsible, unfairly in the extreme, for this meltdown. And, you know, we may lose him. That is incredibly disturbing.
Truthdig: It is. OK, the next question, from Jason: Is the American dream a myth, and did that myth help cause the current problem? I just turned 30 and do not have a house, yet most of my friends do or are planning to buy very soon. I used to feel left out and envious, now I feel like I never want to have such a burden as a mortgage and be a slave to it. And by extension a slave to my job and a corporation in order to earn money to make my mortgage payments.
RS: Well, the fact is, you know, you want to own a house because there are a lot of breaks to people who own houses. You get a deduction on your interest rate, you know; hopefully, when there’s inflation, you’re protected somewhat. There were rational reasons why people wanted to be stakeholders, and it’s built into the … I wouldn’t say the myth; it’s built into a basic idea of American democracy of a large, ever-larger middle class of stakeholders, rather than the extremes of rich and poor which have characterized other societies. And the whole dream of the founders, going back to the Founders, was to have, you know, basically what they had in mind was an agrarian democracy with basically stakeholders in a large middle class…[OMISSION]…would create stability in the society. Now that’s eroded dramatically, and we have very sharp class differences now that have exacerbated over the last 20 years. We have 44 million people in this country now living officially under the poverty line. That’s official government statistics; 44 million people are poor! A big chunk of our population, people who are called middle class, are now really suffering. And so the question of homeownership … you’re right in the sense that homeownership was part of a dream. A dream of a large American middle class of stakeholders, people who had something, you know. They could say, “OK, I’ve got my home. I’ve got this piece of land. I’ve got something to pass on to my children. I’ve got a place where I can live when I’m retired and, you know, leave it.” That has been destroyed. It’s been destroyed. Now, in terms of the question that was asked—“does it make sense to opt out of that?”—yes. It does. Because right now it’s a very risky business to get into, housing. They have in fact destroyed the housing market, and right now the reason we have a moratorium with some of the leading banks on foreclosures is we’ve got all these houses … this is an absolute disaster. Just tracing the actual ownership of tens of millions of houses has become a major problem. … [OMISSION] And the reason I bring up this Tom Donilon, who was the chief counsel at Fannie Mae when they concocted this thing, and his wife is chief of staff to the vice president, Joe Biden—you know, I wonder, what are these people thinking? This is the guy that Obama just praised, his “probing intellect.” Why doesn’t Obama go probe this guy’s probing intellect and ask him today—just imagine, Barack Obama could say “Hey Tom, I just made you head of my National Security Council. I’ve trusted now the nation’s security and future to you, Tom. ’Cause you’re so bright, you have such a probing intellect, you have a remarkable work ethic. So what happened between 1999 and 2005 when you were the counsel of Fannie Mae, and you concocted this crazy system of the MERS, the Mortgage Electronic Registration Systems, that is now destroying the housing market? What were you thinking? What did you think would work? How do we fix it?” You know? You would think one reporter would ask the president that, you know? “Have you asked your good buddy Tom, now, the guy who helped you in the debates, your close friend—have you asked him why he created this monstrosity of a mortgage registration system so we don’t even know who owns these houses now?” And the people are not asking that. And if you can detect some rage in my voice—I feel very angry about this. I don’t get it. I really don’t get it. I voted for Obama, I contributed money to his campaign, and I wonder how in the world—how in the world did you turn to somebody who was as close as anyone to the creation of this monstrosity of securitized mortgages? And all the mess that was created when he [Donilon] was at Fannie Mae and made an enormous amount of money off the run-up of Fannie Mae stock and everything. And you turn to this guy to be your closest confidant and protect this country in terms of national security in the world? I think it’s a major, major scandal and it’s very, very depressing in terms of an assessment of who Obama is and where he gets his information.
Truthdig: Oh, yes, exactly. We have time for one more question. And the question comes from BJW ... how are new mortgages being treated differently now?...
RS: This is the same question, and they’re not being treated differently, and that’s the whole problem. That Obama, for all of his talk about financial regulation and changing the system—they didn’t change the system. The banks are in charge, they do what they want to do, they’re not held accountable, and the mess continues. That’s the sad truth here. And, you know, this president … I can’t tell you. This is so disillusioning. So disillusioning. That this guy has been a craven tool of Wall Street. I’m sorry. That’s just the reality. And how in the world this candidate of change, who was supposed to be a community organizer, who was supposed to be feeling the pain of people out there, you know, ended up being the typical best-and-the-brightest, a lead educated snob who ends up being really indifferent to the suffering out there, and then leaves it to the Sarah Palins of this world to represent the fear and anger of people out there, and we don’t have a serious progressive alternative. That’s a very sorry state of affairs.