Economic and Budget Issue Brief

Summary

Published July 26, 2010

| FOXBusiness

With little fanfare, the U.S. government has rapidly become the nation’s top backer of mortgages that require little or no money down, with taxpayer guarantees on them surpassing $1 trillion earlier this year, a FOX Business analysis shows.  

“Zero down” mortgages as high as $1 million have been backed by the Department of Veterans Affairs, which by law offers most of its loans with no down payment required. Such “no money down” jumbo loans were approved in higher-cost housing markets, VA officials said. The average VA loan is $207,000.

The Federal Housing Administration alone has expanded loan guarantees to $865 billion in June, including some refinancings of existing loans – almost double the 2007 level — according to an agency report.

Such low- or no-down-payment loans, along with falling interest rates, have helped millions of low- and moderate-income homebuyers who might otherwise not have gotten a loan. But some housing-finance experts warn “affordable” mortgage programs at the VA, FHA and Department of Agriculture could be laying the groundwork for another housing crisis — and additional taxpayer bailouts.

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It’s called a party though it’s not a party, though even that depends whom you ask. It’s not in the business of endorsing candidates except when it is, and has no interest in the establishment even though one member is running for governor.

Welcome to New York’s Tea Party movement. What began in early 2009 as a series of protests against the Obama administration’s stimulus plan and health-care legislation has grown into a bona fide political force that has asserted itself into state and local politics. (There are over 100 groups in New York state alone, although membership ranges from the thousands to, literally, parties of one.)

The movement itself, however, has no center and no leader, no organizational structure or message control.

So when a candidate emerges and aligns himself with the Tea Party, or claims to be of the Tea Party, confusion and power struggles are likely to ensue. Such is the case with conservative billionaire Carl Paladino, who officially entered New York’s gubernatorial race on April 5.

Initially, Paladino’s campaign floated the idea of calling his third line “T.E.A.” His supporters in the movement loved it, but other Tea Party members across the state felt it was a cynical, exploitative move.

David Webb, a conservative commentator and leader of New York City’s powerful group TeaParty365, publicly objected. Webb called Paladino on his Tea Party credentials and accused him of attempting to co-opt the movement.

“When [Carl] couldn’t get the Republican line, he tried to sell himself as the Tea Party candidate,” Webb says. “At which point I asked him, ‘When did I give you my endorsement?’ ” (This, even though the Tea Party is not supposed to be about leadership or endorsements.)

Paladino says that T.E.A. never stood for Tea Party and was never meant to imply association with the Tea Party — it was, he says, simply an acronym for Taxed Enough Already.

So his campaign came up with another name for the ballot — the Taxpayers line. Close enough to the original idea, but not so close as to cause controversy.

“David Webb’s problem with this campaign is something we can’t really explain,” says Paladino’s campaign manager Michael Caputo. “Carl never once claimed to be the candidate of the Tea Party. David Webb doesn’t even understand the DNA of the situation. If David Webb would’ve participated instead of standing outside and wagging his finger . . .”

Caputo is on a conference call with Paladino, and his voice rises in frustration while Paladino silently defers. “We would much rather have a guy inside our tent pissing out,” Caputo says, “than outside our tent pissing in.”

Such intra-party fighting and confusion over what the movement’s philosophical and practical aims are is the story, writ small, of what’s happening to the Tea Party nationally.

WHEN Sarah Palin spoke to thousands at a Tea Party rally in Boston last April, not all were pleased. “The Tea Party movement is dead . . . Sarah Palin drove a stake right through its heart last night,” wrote one columnist at the Nashville Post’s politics blog. “Sarah Palin didn’t give a Tea Party speech last night. She gave a partisan Republican address . . . designed to position her for a presidential run.”

Massachusetts Sen. Scott Brown — whose win has been credited, by some, to the Tea Party movement — was invited to speak at the same rally. He declined, fueling speculation that he’s looking to distance himself from the group in the run-up to the November elections — even though he courted them in the January special election that won him the late Ted Kennedy’s seat. Brown’s Facebook page is studded with comments from Tea Partiers who feel betrayed by his vote in favor of financial reform.

“Using some independence may be admirable, but siding with Pelosi and Reid is not!” wrote one.

“The guy that campaigned against BIG GOVERNMENT voted on a bill to make it even BIGGER,” wrote another.

What’s happening with the Tea Party now, as chaotic as it may seem, is not unprecedented.

“This is what happens to third parties when they go from being a legitimate outsider movement to an insider movement,” says Pat Egan, professor of political science at NYU. “The same thing happened with the Green Party and with Ross Perot’s Reform Party. The infighting and the disparate messages — it’s completely par for the course.”

It also shows no imminent signs of abating. After California radio personality and Tea Party Express member Mark Williams made racist comments on his blog last week, another nationally prominent group, the Tea Party Federation, expelled him as a member — which the Tea Party Express says they don’t have the authority to do.

A few days later, the announcement by Rep. Michele Bachmann (R-Minn.) that an official Tea Party caucus had been formed was met with confusion — the group’s key goal is to operate outside of government, so who said she could do that?

Then again, who says she can’t?

“We are not the mouthpiece of the Tea Party,” Bachmann said on Wednesday. “We are not taking the Tea Party and controlling it from Washington, DC. I am not the head of the Tea Party . . . the people are the head of the Tea Party movement, in all their form.”

THE MOVEMENT, however, is based on the rejection of party politics and formal organization of any kind. Now it’s suddenly represented on the Hill by 30 elected Republican officials, and the actual Tea Party itself, due to its decentralized structure, has no recourse.

“I don’t like it,” Webb says. “I don’t like the way it was done. This is a citizen movement.”

“I personally don’t have a problem with it,” says Jennifer Bernstone, a member of the upstate group CNY 912 (which stands for Conservative New York; “nine-twelve” is for the first day after Sept. 11). She’s now an active Paladino supporter. Bernstone — who didn’t become political until about 18 months ago — admits she doesn’t know what a caucus is, but surmises that one is probably helpful. “I just think it’s really great that people are stepping up and paying attention,” she says.

Bernstone’s group is one of the more influential in New York state, with its 1,119 “patriots” and association with Glenn Beck’s Rochester 912 Project.

A former fitness instructor, Bernstone decided to work for Paladino after Caputo solicited her endorsement back in March. At their first meeting, Bernstone gave Paladino a pamphlet that outlined the “principles and values” of the group.

“He read it for five minutes,” she recalls, “and then he turns to me and says, ‘This is really incredible.’ ” She abdicated her role as group organizer to work for him. “Once I realized I’d be working on the campaign, I stepped back,” she says. “We don’t endorse.”

That’s an assertion that Mike Long, chairman of the state Conservative Party, finds surprising. “If they’re not interested in endorsing, that’s pretty funny, because the number of calls and e-mails I get . . .” He laughs. “Maybe they’re acting as individuals.”

“They endorsed me, but it wasn’t an official endorsement,” says Dean Murray, congressman from Long Island. “I ran as a Republican but I was known as the Tea Party candidate.”

So does the Tea Party endorse? “I guess it depends who you ask,” Murray says. He is not a fan of Paladino: “Carl running for governor — you’ve just now ruined the movement,” he says. Murray believes Paladino is the kind of politician who even other politicians find offensive.

“It helps to be mad as hell and have a million dollars,” Murray says. “My fear is someone like Carl Paladino coming in and trying to hijack the movement and maybe pulling it off.”

Long’s party has endorsed Rick Lazio for governor, but Long thinks that Paladino has a “slight edge” among the Tea Partiers. “He’s appealing to the anger of a lot of people,” he says. “He’s got a lot of money, a lot of ads up.”

And, much to David Webb’s chagrin, Paladino — who admitted, this spring, to forwarding racist e-mails, and has done the party no favors in attempting to distance itself from such impressions — has the backing of the majority of New York’s Tea Party movement. (Paladino is firmly anti-union, wants to cut Medicaid by 30%, and is in favor of repealing New York’s ban on assault weapons. Lazio favors negotiating with unions, backs less punitive Medicaid reform, and says he’ll reduce state spending and lower taxes.)

Webb, who is African-American, says his issue with Paladino begins and ends with “his attempt to co-opt the movement.” He says it has nothing to do with Paladino’s positions, or even really the racist e-mails — though that hardly helps the widespread misapprehension that all Tea Party members must inherently be racist.

At one Tea Party event, Webb says, “a black guy came up and said, ‘You’re all a bunch of racists.’ They’ll yell, ‘racist’ this, ‘racist’ that,” he says. “And then you get the occasional ‘Uncle Tom’ or, ‘You don’t know which party’s good for you.’ ” Mostly, though, he says he gets positive feedback: “Most people are curious, and I think that speaks to New Yorkers,” he says. “They are not a closed-minded group.”

And changing minds, Webb says, is what the Tea Party should be doing. “It should be about educating people, letting them have the information they need to hold candidates accountable at the ballot box.”

LIKE Jennifer Bernstone, Staten Islander Frank Santarpia, 58, had never been involved in politics. “I’d sit in my chair and yell at the television,” he says. “Or my in-laws.”

Then he saw Rick Santelli’s infamous CNBC rant about the mortgage bailout in March 2009. “That was the straw that broke the camel’s back, when he said, ‘Do you feel like bailing out your neighbor?’ ”

Santarpia went online. “I found this website that said, ‘If you want to organize a Tea Party, no experience necessary.” Now he leads one of the largest in the state, with 1,500 members. “Staten Island is an island of red in a sea of New York City blue,” he says. “The Obama administration is abhorrent to us.”

When Staten Island’s Congressman Michael McMahon “started voting in lockstep with Nancy Pelosi,” Santarpia’s group made its displeasure known with an April 15 rally across the street from McMahon’s office. Three hundred people showed up. Not long after, McMahon and four other members of his group were invited to McMahon’s office in DC to discuss the congressman’s looming vote on health care legislation.

“He sure enough voted no,” says Santarpia, who brought along a doctor, a lawyer, a housewife, a plumber and a Wall Street executive. The latter, Santarpia says, is a secret Tea Partier who doesn’t want his firm to know. Santarpia understands.

“Every group has some yahoos,” he says. “We don’t get involved in social issues. We’re about knowledge and keeping people informed.”

He, too, is skeptical of Paladino’s loyalty to the movement and does not want to see it co-opted. Nor does he see the benefit in the party formalizing itself, having some kind of central command and message discipline.

“I think it would lose its potency,” he says. “Shoving all these ideas into one frame — it won’t work.”

“I hope it never does become a party,” says Rep. Dean Murray of Suffolk County. “Then you have a danger of it becoming like other parties.”

For all its intra-party dissent, the Tea Party has shown some signs of maturation. Paladino, after all, forced Lazio into a primary for the Republican nomination, and right now polls 2 points ahead of Lazio in a match-up against Andrew Cuomo. (Cuomo still demolishes both.) The Tea Party may well upset the Republican primary this fall, provided Paladino mobilizes enough voters by appealing to their anti-establishment senses.

Ironically, Paladino may win the Tea Party vote by capitalizing on the very thing that his nemesis Webb sees as the Tea Party’s great virtue: the power and agency of the individual, the deep need to believe he or she is acting as a pure, autonomous player in the cesspool of politics.

“I’m not looking for the support of units,” Paladino says. “I don’t care what David Webb thinks about me. I’m not looking for unanimity. I’m looking for unity.”

That last thought may not make much sense, but it’s exactly the kind of rhetorical flourish that speaks to the movement.

“I wouldn’t be surprised to see the Tea Party emerge as a potent force,” says NYU’s Egan. “If we have a third party in New York politics, it’s the Working Families Party on the left. I can certainly see the Tea Party doing the same on the right.”

That idea lines up with David Webb’s philosophy. “The goal is not to be a unified political party,” he says. “It’s to get the right people into office.”

Read original article at NYPost.com

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by Lydia Saad

PRINCETON, NJ — Gallup’s 2010 Confidence in Institutions poll finds Congress ranking dead last out of the 16 institutions rated this year. Eleven percent of Americans say they have a great deal or quite a lot of confidence in Congress, down from 17% in 2009 and a percentage point lower than the previous low for Congress, recorded in 2008.

The Gallup poll was conducted July 8-11, shortly before Congress passed a major financial regulatory reform bill, which President Obama signed into law this week.

Underscoring Congress’ image problem, half of Americans now say they have “very little” or no confidence in Congress, up from 38% in 2009 — and the highest for any institution since Gallup first asked this question in 1973. Previous near-50% readings include 48% found for the presidency in 2008, and 49% for the criminal justice system in 1994.

This year’s poll also finds a 15-point drop in high confidence in the presidency, to 36% from 51% in June 2009. Over the same period, President Barack Obama’s approval rating fell by 11 points, from 58% to 47%. However, confidence in the presidency remains higher than in 2008 — the last year of George W. Bush’s term — when the figure was 26%.

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WASHINGTON (AP) — Government watchdogs told a Senate panel Wednesday that the Obama administration’s effort to help homeowners avoid foreclosure isn’t working and that the Treasury Department has failed to fix the program.

Special inspector general for the financial bailouts Neil Barofsky said the program has not “put an appreciable dent in foreclosure filings,” during a Senate Finance Committee hearing on the $700 billion bank bailout. He also said the Treasury Department has ignored earlier demands that it set clearer goals for the program.

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* Total US govt financial system support seen at $3.7 trln

* US support swells by $700 bln in past year-watchdog

* Mortgage, housing commitments account for most of rise

* TARP watchdog criticizes Obama housing rescue efforts

By David Lawder

WASHINGTON, July 21 (Reuters) – Increased housing commitments swelled U.S. taxpayers’ total support for the financial system by $700 billion in the past year to around $3.7 trillion, a government watchdog said on Wednesday.

The Special Inspector General for the Troubled Asset Relief Program said the increase was due largely to the government’s pledges to supply capital to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) and to guarantee more mortgages to the support the housing market.

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ANDREW TAYLOR, Associated Press Writer 

WASHINGTON (AP) — Senate Democrats broke through a stubborn Republican filibuster Tuesday and pressed to restart jobless benefits for 2½ million Americans still unable to find work in the frail national economic recovery. The Democrats were victorious by the single vote of a new senator sworn in only moments earlier.

Senators voted 60-40 to move ahead on the bill, clearing the way for a final vote in the chamber on Wednesday.

The recovery from the nation’s long and deep recession has produced relatively few new jobs so far, and millions of people’s unemployment benefits began running out seven weeks ago as Congress bogged down in an impasse over whether the $34 billion cost of a fresh extension of benefits should be paid for with budget cuts or be added to the $13 trillion national debt.

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Mark Williams, the tea party leader who wrote a blog post this week calling the National Association for the Advancement of Colored People (NAACP) racist, has been “expelled” from the National Tea Party Federation.

Williams wrote the blog post on Thursday in response to the NAACP’s Tuesday declaration accusing the tea party movement of tolerating racist elements in its midst (see The Upshot’s rundown on the week of attacks and counterattacks here). It was written as an imaginary letter to President Abraham Lincoln and accused the NAACP of being racist for using the word “colored” in its name. When some reacted to it in outrage, Williams deleted it from his website, declaring it time to “move forward.”

The National Tea Party Federation apparently decided to move forward without Williams. Spokesman David Webb said on Face the Nation this morning that Williams and his Tea Party Express had been pushed out because Williams’ posting was “clearly offensive.”

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