Democrat Civil War: Progressives Target Potential Clinton Veep Julian Castro

: Secretary of Housing and Urban Development Secretary Julian Castro introduces Democratic
Erich Schlegel/Getty Images

The tension among Republicans after a lengthy presidential primary that began with seventeen contenders and ended with Donald Trump as the nominee, gets all the media attention, but the Democrat civil war has also been quite vicious.

Politico covers the latest battle, in which progressives launched a pre-emptive strike against Julian Castro, widely seen as a top vice-presidential pick for not-quite-yet presumptive nominee Hillary Clinton, but Castro seems to have launched a pre-emptive strike against their pre-emptive strike.

Castro, who is currently the Secretary of Housing and Urban Development, is 41 years old, so he would balance out the Clinton ticket in several useful demographic categories. He came under fire last week from progressive groups upset by the way HUD has been selling off delinquent mortgages:

At issue is the Distressed Asset Stabilization Program, started in 2010 to allow mortgages going toward foreclosure to be sold to what HUD calls “qualified bidders and encourages them to work with borrowers to help bring the loan out of default.”

The progressives attacking Castro say they believe the mortgages should be sold instead to nonprofits and other institutions that would care more about the communities involved. What Castro’s done, they say, has essentially amounted to a fire sale for Wall Street firms.

Rep. Raúl Grijalva (D-Ariz.), co-chairman of the Congressional Progressive Caucus and one of Sanders’ few endorsers in Congress, complained about the program to Castro last week in a letter obtained by Politico.

“Your own Distressed Asset Stabilization Program, which was designed to help right the wrongs of the meltdown years, has been selling homes that once belonged to the families I’ve spoken with at rock-bottom prices to the Wall Street entities that created this situation in the first place,” Grijalva wrote.

HUD attempted to rebut these charges by insisting that its program has been working as designed, with the goal of “providing an option for homeowners to remain in their homes,” as one spokesperson put it. To that end, a policy change was implemented last year that required loan purchasers to delay foreclosure proceedings for a year.

The department also stressed that Castro has “continued to meet with advocates, in the hopes of improving the policy,” and one of those improvements involved selling more mortgages to nonprofits, as the progressive groups demand.

That wasn’t good enough for the coalition of progressive groups going after Castro, which include “the Alliance of Californians for Community Empowerment (ACCE) Action, American Family Voices, Color of Change, Courage Campaign, CPD Action, Daily Kos, MoveOn, New York Communities for Change, Other 98%, Presente, RootsAction, Rootstrikers and the Working Families Party,” according to Politico.

There’s even a hashtag-ready website for the anti-Castro effort, “HUD’s two most recent sales have sent 98 percent of the mortgages straight to Wall Street – and at a HUGE discount, almost half off! Sign the petition to tell Secretary Castro to stop selling our neighborhoods to Wall Street!” the website implores.

Some of Castro’s critics complained that HUD’s practices are so opaque that it’s hard to tell if the promises made by Castro and his officials have been fulfilled. His defenders argue that progressives don’t understand how the delinquent mortgage market works – only big banks can afford to buy them in volume, and selling the loans quickly is the best way to help delinquent homeowners.

One of the big progressive complaints is that HUD doesn’t attach enough strings to these mortgages when selling them to banks. Of course, if they had more strings attached, the banks would be less likely to buy them, and a rule like “no foreclosures against people who aren’t making mortgage payments for a year” is already a very thick string. It’s amusing how progressives always act surprised when the people expected to pay for their agenda try to escape their clutches.

It’s also amusing that anyone contemplating a vote for Hillary Clinton, of all people, would be worried about her vice-presidential nominee being too cozy with Wall Street. The point of going so hard on Castro is probably to signal Clinton that she needs to mend fences with progressives after she finishes putting Bernie Sanders away. It would be very unusual if they settled for her throwing them a bone with her vice-presidential pick, especially since she’ll want to pivot to the center and make her ticket more appealing, the way young, charismatic, and Latino Julian Castro could.

Castro clearly heard the sound of incoming fire from the far Left, because on Monday, Politico reported that he will announce changes to the HUD mortgage program:

Among the changes, according to people with knowledge of what’s coming: The Federal Housing Authority will put out a new plan requiring investors to offer principal reduction for all occupied loans, start a new requirement that all loan modifications be fixed for at least five years and limit any subsequent increase to 1 percent per year, and create a “walk-away prohibition” to block any purchaser of single-family mortgages from abandoning lower-value properties in the hopes of preventing neighborhood blight.

HUD claimed these changes weren’t specifically made in response to pressure from progressives, and doggedly continues to insist its critics are using incorrect information to judge the performance of the mortgage program.

Castro might have some trouble getting the progs off his back. Some of the activists quoted by Politico sounded unsatisfied by his proposals – they really want more heavily discounted mortgage sales to nonprofit groups, and never mind how much red ink that would spill across HUD’s ledgers.

Also, there were some grumbles about how Castro’s policy changes wouldn’t go into effect before the next big mortgage auction on May 18, and activists want results from HUD, not more promises. The Department, however, argued that the May 18 auction is for a different category of mortgages, and no auction for the Distressed Asset Stabilization Program has yet been scheduled in 2016.

“Activists had been growing frustrated with the pace and substance of the conversations with HUD, and HUD officials have been losing patience with them as well, feeling that the activists are out for attention and landing on Castro simply because his name is in the running mate mix,” Politico writes. “And, well aware that this is a critical political moment for Castro, activists warn that they’re ready to keep after him until the Democratic convention in July, and beyond that if he is Clinton’s pick.”

It sounds like a whole lot of signaling is going on here. Progressives are slipping into the “bargaining” stage of the grief process over Bernie Sanders, flexing their muscles and letting Clinton know they expect some concession, or else they’ll make trouble for her all the way through the convention.  

The “beyond” part is a bit more of a stretch, and progressives might be fooling themselves by thinking they can do real populist damage to Hillary “$350,000 Speech” Clinton by carping about her veep’s alleged bias toward Wall Street, because of a mortgage program not many voters truly understand. Also, the spectacle of banks buying mortgages isn’t exactly shocking to anyone who ever took out a mortgage.

As a bit of Democrat Civil War theater, however, it’s an interesting performance, and a sign that Clinton’s still having trouble nailing down her left flank.


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