Forgotten Again

How quickly they forget!

In its first executive action last Friday, within the hour after Trump took the oath of office, his administration suspended the implementation of a rule that would have reduced the cost of mortgage insurance for FHA-backed loans. The backing helps first-time buyers, people with poor credit, and those who lack funds for a 20% down payment obtain private loans.

About 16% of new mortgages are FHA insured. The premium rate would have been reduced from 0.85% to 0.60%, saving borrowers about $29 monthly on a $200,000 mortgage.

The program, on the one hand, protects the lenders on riskier loans, and, on the other, makes homeowners out of people who wouldn’t be if they had to rely on the lenders alone. It thus strikes a balance between the interests of the capital markets and those of working-class borrowers. It’s a good use of public monies. I assume without knowing it used to have bipartisan support.

Who are these borrowers? I’ll make an educated guess. Millennials too burdened with student debt to save much for a down payment? People of color, just recently working poor, with better jobs but little savings?

How about white rural workers with little education who voted for Trump because they’re wondering where their next decently paid job will come from, or how long the job they’ve got will last? Maybe they had a gap in employment and don’t have much saved either.

In other words, Trump’s “forgotten man,” in the words of his inaugural address. Forgotten again. Almost immediately.

How did this come to pass? It’s an instance of the new contradictions within the Republican party.

Senator Pat Toomey of Pennsylvania, a fiscal conservative but no friend of Trump’s during the fall campaign, questioned Ben Carson at the latter’s confirmation hearing for the post of Secretary of Housing and Urban Development about the FHA’s premium rate reduction. Not surprisingly, Carson was unaware of the change. He told Toomey he wanted “to really examine that policy,” and the suspension was the result.

Fiscal conservatives tend to think that if it’s possible for the markets to do a thing, the federal government shouldn’t be doing it. Liberals look at what private capital is actually doing, and ask whether government can serve a legitimate public need that markets do not. So Senator Toomey would like to turn over the market for substandard mortgage loans to private lenders. But there are Trump voters, working men and women, who may still need the government’s backing to get an affordable loan.

The class contradiction is pretty stark. Except now there are Republicans on both sides of it. The fiscal conservatives won this round. Trump will have to take them on if his forgotten man is to win the next one.