Just Shut Up And Eat The Baloney
Tim Cavanaugh asks at reason, "Should we be relieved or mad as hell that Treasury Department suits seem to realize their public comments on the economy are baloney?"
...In the discussion of the Home Affordable Modification Program ... Treasury's good ol' boys let on that, hey, it was all just a dodge to help the banks: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....So here is the most charitable way I can characterize these comments: They're making a variant of the "Thanks to NASA we have Tang" argument. Or a more recent cover version: "OK, so Cash-For-Clunkers didn't do squat for the environment, but look what it did for car sales." That is, they are admitting HAMP was not about keeping people in their borrowed homes at all. Instead, it was about bailing out Treasury's bank buddies.
Agree in general with your distaste with the concept of bailing out banks. But here's the thing in this particular case: Who, in the first place, forced these banks to loan money to people who couldn't afford to own their own homes?
The government, that's who. Through Community Investment Act legislation (or whatever it was called) and through strong-arm tactics by both federal agencies and their proxies (ACORN, for instance), the banks were given a choice to either play ball or to have their names dragged through the mud or worse. I wouldn't be surprised if, at the time, the feds didn't assure the banks, with a wink and a nod, that they'd be bailed out by the taxpayer if things went south -- which is exactly what happened. And, of course, that's not even mentioning the lack of oversight on Fannie and Freddie, and that the feds are still into this same kind of mismanagement and wrong-headed policy, to this very day.
Not saying the financial industry is blameless in all this. Just saying that if you trace this stuff back to its origin around enough corners, you always seem to run into the dirty hand of the federal government in the middle of things.
cpabroker at August 24, 2010 11:17 AM
I don't know much about economics, but this seems like a big redistribution of wealth scheme.
liz at August 24, 2010 11:55 AM
I love this blog. I'll undoubtedly be looking into it frequently.
Dede Kolias at August 25, 2010 2:59 AM
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