Treasury Makes Shocking Admission: Program for Struggling Homeowners Just a Ploy to Enrich Big Banks

[kpete]

Source: Alternet

Treasury Makes Shocking Admission: Program for Struggling Homeowners Just a Ploy to Enrich Big Banks

The Treasury Dept.'s mortgage relief program isn't just failing, it's actively funneling money from homeowners to bankers, and Treasury likes it that way.
August 25, 2010 |



The Treasury Department's plan to help struggling homeowners has been failing miserably for months. The program is poorly designed, has been poorly implemented and only a tiny percentage of borrowers eligible for help have actually received any meaningful assistance. The initiative lowers monthly payments for borrowers, but fails to reduce their overall debt burden, often increasing that burden, funneling money to banks that borrowers could have saved by simply renting a different home. But according to recent startling admissions from top Treasury officials, the mortgage plan was actually not really about helping borrowers at all. Instead, it was simply one element of a broader effort to pump money into big banks and shield them from losses on bad loans. That's right: Treasury openly admitted that its only serious program purporting to help ordinary citizens was actually a cynical move to help Wall Street megabanks.

Treasury Secretary Timothy Geithner has long made it clear his financial repair plan was based on allowing large banks to "earn" their way back to health. By creating conditions where banks could make easy profits, Getithner and top officials at the Federal Reserve hoped to limit the amount of money taxpayers would have to directly inject into the banks. This was never the best strategy for fixing the financial sector, but it wasn't outright predation, either. But now the Treasury Department is making explicit that it was—and remains—willing to let those so-called "earnings" come directly at the expense of people hit hardest by the recession: struggling borrowers trying to stay in their homes.

This account comes secondhand from a cadre of bloggers who were invited to speak on "deep background" with a handful of Treasury officials—meaning that bloggers would get to speak frankly with top-level folks, but not quote them directly, or attribute views to specific people. But the accounts are all generally distressing, particularly this one from economics whiz Steve Waldman:

The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with "the system," "the economy," and "ordinary Americans."

Read more: http://www.alternet.org/economy/147955/treasury_makes_shocking_admission%3A_program_for_struggling_homeowners_just_a_ploy_to_enrich_big_banks/

[babylonsister]

1. I'd love to see the Treasury quote; I wonder why the exact words

weren't included?

"This account comes secondhand from a cadre of bloggers..."

[girl gone mad]

3. Are you accusing these bloggers of lying?

They have all told the same tale, and these are all very respected professionals.

eta the tale, via http://www.interfluidity.com/v2/933.html">interfluidity:

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

[Igel]

8. Why the stark, middle-excluding choice?

Tertium non datur is only permitted when you're confronted with well-formed propositions that are limited and for which exclusivity is reasonable, where P and not-P are really the only options.

If you have "tell the truth" the "not P" term is either "not tell the truth" or "tell the not-truth". If we assume intentionality as part of "telling" then "tell the not-truth" is lying. But we've excluded "not tell the truth," for which there can be many understandings. In other words, "tertium datur" because the propositions aren't properly formed. Some examples.

My mother insists I'm sleeping in her house every night and says she hears me moving about the house, that I work at her local bank, just finished serving a prison term for embezzlement, and have split up with my wife. I live 1200 miles from her. I'm a translator and have never worked in a bank. I've never so much been arrested--my greatest offense was a speeding ticket when I was 17. I made my wife lunch this morning and expect her home from work around 7 tonight, and will make her dinner which we will eat while watching "The Mummy". My mother's not lying. She fervently believes what she says is the truth. She suffers from dementia.

And there was the time that three people "informed" on me to my boss over something I said. One person was in the room. One person had been in the bathroom and out of earshot. Another had been in a different, albeit nearby, town. The first person misconstrued what I said; the second and third falsely believed that they had been there--they had reconstructed their memories, so that one even argued with his wife when she pointed out that they were both at her brother's anniversary party that night, one that the two of them had organized. They weren't lying. One heard or recast what I said through the filter of her own confirmation bias and the other two had deluded themselves.


Then there was the time last week when I told my wife's coworker that she'd be back in a couple of minutes. I said she'd taken our son to get new shoes for the start of school, had been gone an hour, and was due back. Two hours later, she still wasn't back. After getting shoes, she decided it was lunch time so they stopped at a restaurant. Then my wife decided to stop at a bookstore. I wasn't lying. I was wrong.

"Lie" does not mean "say incorrect or false things." These bloggers might be right. They might simply be wrong, spinning overmuch. Or they might be misrepresenting part as being the whole.

Again, it's easy to invoke the law of the excluded middle. But it's still wrong.

Why? Because in a situation where any relief for mortgage holders keeps them from being foreclosed upon you will see relief for banks whose mortgage portfolios are at risk. In this, some regulators will be more concerned with the systemic risk of having more banks go belly up. Others will be more concerned with the effect on mortgage holders about to lose their largest asset. The problem is, just as there's only "truth" or "lying" for some people, so also there can only be one possible motive for doing something. Either the regulators are *all* in favor of helping the banks or they can only all be for helping the mortgagee. There are two options and no requirement that everybody be in agreement in wanting the same program. However, if you only talk to one group--say, Treasury officials--or if you only really hear one group, you could take away the impression that it's an all-or-nothing game.

Too much black-and-white, binary thinking. It helps stoke outrage and group-boundary thinking. It doesn't help the functioning of a decent society.

[snot]

12. GREAT response, TRULY -- deserves its own post. But

the fact is, this program has done v. little to help borrowers.

[girl gone mad]

17. Right..

the bloggers all concluded that the Treasury was pleased with HAMP, despite its remarkable failure to help homeowners.

Yet, somehow these people, who have otherwise proven themselves to be very intelligent and capable when it comes to analyzing policy choices and predicting the future behavior of policy makers, all happened to come to the exact same wrong conclusion, despite the fact that they did not discuss the meeting with each other in any specific sense afterward?

I have read several accounts of what was said and in what context what was said was said. Judging by the administration's abject failure to adhere to the advice given by parties whose sole interest was in aiding homeowners in danger of foreclosure, and judging by the unabated and unfettered bailouts this administration has continued to gift the banks while largely neglecting middle class woes, my judgment rests in agreement with the author of the OP.

[Hawkowl]

10. Read much?

Can't process the written word with the old gray matter anymore?

"—meaning that bloggers would get to speak frankly with top-level folks, but not quote them directly, or attribute views to specific people."

[n2doc]

2. And, of course, this way the banks can "justify" all those huge bonuses

After all, they are making tons of money! The CEO's are really brilliant and must be compensated!

[Rex]

4. Face facts, the govt would walk all over our still warm body to help

a mega bank or huge corporation keep paying their CEOs top dollar! For you see, we little working grunts don't really do enough for our govt to warrant outright theft from our national treasury - huge conglomerates...yeah they do. Too big to fail, too little to care.

[katandmoon]

5. Shocker!

[xchrom]

6. color me unsurprised.

the People can turn out in the hundreds of thousands -- all over the world --

but for ourselves -- for our own economic justice -- not so much.

so they're safe.

[Winterblues]

7. Isn't it about time for another round of Bonuses for the Bankers?

:banghead:

[Roland99]

9. from the "Water is wet" news dept.

[amborin]

11. knr

[Progrimm]

13. No surprise here...

bu bu but Obama's teh super socialist that hates the rich!

[robcon]

14. Gee, no quote, background briefing.

And some believe this 'admission' by the treasury Dept.

[JoeyT]

15. Which part is supposed to be shocking?

That they were only concerned with helping rich people loot or that they're willing to admit it?

[Missy Vixen]

16. Hmm... Let's see here. Leak it to bloggers,

discredit them and their information by not allowing direct quotes or attribution, and then, there's no problem, right?

:tinfoilhat:

We've never, ever seen this before.

:eyes:

[cherokeeprogressive]

18. The BANK owns the mortgage. Spending TAXPAYER money to keep mortgages from going into foreclosure

is giving TAXPAYER money to BANKS.

[girl gone mad]

19. It's a bit more complicated.

We could have been demanding cramdowns or otherwise asking the banks to take a bit of a haircut in the process. Instead, our foreclosure prevention programs were structured to help the banks as much as possible, often against the interests of the struggling homeowners.

[laughingliberal]

20. Exactly! nt

[cherokeeprogressive]

22. Just a bit. A tiny bit.

The end result is still that the BANKS are relieved of some of the losses they suffered because of speculatation at the expense of taxpayers who weren't part of the equation.

[laughingliberal]

21. Very consistent with Geithner's attitude during Warren's questioning of him about HAMP. He admitted

HAMP had not done much to help homeowners but his attitude was pretty much, 'so what.' Answers to further questioning by her as to whether there were any plans to do more to help homeowners revealed no plans.

[depakid]

23. That much was clear last Spring when authority for bankruptcy cram down was rejected

alongside the eminently sensible policy of Right to Rent and Redemption in foreclosure cases.

Neither the administration nor key members of the Democratic "leadership" were interested in effective public policies like these (which would have cost the Treasury next to nothing) and that would have benefitted Main Street over Wall Street.

Hence, even as they settled in as a full on majority, they set in stone the processes by which their majorities would be threatened.