Political Muscle And HAMP

Kevin Drum writes:

An effective regime for foreclosure relief would have done wonders for economic recovery, but it would have hurt the interests of the financial sector, which fought furiously to kill it in early 2009. And they won. Not because they were right, but because they had the raw muscle to get their way and middle-class homeowners didn't. That was good for banks, not so good for the rest of us.

This is entirely too kind to President Obama and the corrupt and incompetent Tim Geithner. Indeed, in the link Drum provides, he quotes Atrios writing:

They failed to actively support judicial bankruptcy for primary residence first mortgages (aka cramdown) and they totally screwed up HAMP. The latter was entirely under their control and the former would have stood some chance of passing if the White House had thrown its weight behind it. It didn't.

In his post today, Drum says:

An effective regime for foreclosure relief would have done wonders for economic recovery[.]

And the President and his corrupt and incompetent Treasury Secretary blew it. How can this failure not be remarked upon? How can Geithner not only keep his job but actually increase his power?

When the Bush Administration rewarded failures like Geithner's, Dem blogs would ridicule this "failing up" phenomena. Now it is only an issue of "political muscle." Ridiculous.

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    If you're a big bank, you're not (5.00 / 1) (#3)
    by Anne on Wed Jan 19, 2011 at 03:58:53 PM EST
    moaning about how Obama blew it, you're relieved that Obama and Geithner remember who's really buttering their bread.

    Yes (none / 0) (#22)
    by BDB on Thu Jan 20, 2011 at 05:51:56 AM EST
    Obama at least has the decency to stay bought.  Cold comfort from where I'm sitting.

    There were several pro-consumer parts of the FinReg bill that the WH effectively killed on behalf of the banks.  Unfortunately, I can't find the links now and my memory isn't good enough to remember whether the provision re foreclosure was one of them (although it certainly seems like the WH got its way on most of what IT wanted in the bill).  


    If I remember correctly, (5.00 / 2) (#5)
    by NYShooter on Wed Jan 19, 2011 at 04:30:58 PM EST
     ten Democrats crossed over and voted with the R's to deny bankruptcy judges authority to "cram-down" mortgages, even on a one to one basis. It would have allowed judges, after a complete, thorough review and analysis of the homeowners situation to reduce the principal amount somewhat.  The Banksters prevailed (with the D's help) and the foreclosure crisis kicked in the afterburners.

    Great leadership, that Obama!

    BTD - I think you change your (5.00 / 1) (#10)
    by seabos84 on Wed Jan 19, 2011 at 07:10:51 PM EST
    definition of "incompetent"

    when timmy is viewed as a thieving turncoat sell out liar, I'd say he's extremely competent.

    calling him incompetent lets him off the hook for deliberately selling us out - while I've never been accused of being an optimist, I did't expect this level of corruption.

    this ain't a bug, it is a feature.


    We can argue about fairness (5.00 / 1) (#37)
    by CST on Thu Jan 20, 2011 at 12:48:58 PM EST
    or we can recognize that life isn't fair and move on.  Bottom line is, even if Joe and Peggy have been A+ citizens, they've probably taken a hit somewhere because of the cr@ppy economy.  Whether their property value is down because they're B- neighbors forclosed and now it's an empty lot, or because Joe's company is making people take furloughs, no one lives in a vacuum.

    If Samantha and Timmy are only B- citizens, but helping all the B- citizens out means the economy gets moving again, than the A+ citizens will benefit too.  Whether it's "fair" or not is kind of irrelevant.

    Pretty simple, and frankly, something that I thought was the backbone of the Dem party.  A rising tide lifts all ships, but you gotta start at the bottom.

    So BTD, why don't you share with us your (none / 0) (#1)
    by Buckeye on Wed Jan 19, 2011 at 03:55:21 PM EST
    thoughts on Geitner?  I am not sure we know.


    3 times a day (5.00 / 1) (#2)
    by Big Tent Democrat on Wed Jan 19, 2011 at 03:57:50 PM EST
    I remind everyone how I feel about Geithner.

    I hope you know I was joking. (none / 0) (#4)
    by Buckeye on Wed Jan 19, 2011 at 04:00:16 PM EST
    My question is, who is worse?  Geitner or Summers?

    Does it matter? (5.00 / 2) (#7)
    by inclusiveheart on Wed Jan 19, 2011 at 05:11:13 PM EST
    They are both pretty bad.  Geithner has more raw power, though.

    Summers has left. (none / 0) (#11)
    by christinep on Wed Jan 19, 2011 at 08:29:01 PM EST
    Not really. (none / 0) (#14)
    by inclusiveheart on Wed Jan 19, 2011 at 09:07:43 PM EST
    He's not gone.

    People forget about modern communication avenues like the telephone and email that make "leaving" in this day and age less meaningful.


    Appointing (none / 0) (#16)
    by cal1942 on Wed Jan 19, 2011 at 09:58:49 PM EST
    Gene "Market solution" Sperling wasn't much of an improvement.

    and you still tell us they are better than voting (none / 0) (#6)
    by Bornagaindem on Wed Jan 19, 2011 at 04:36:06 PM EST
    repug? At least if the repugs really initiate their agenda for a year or two (ie no extension of unemployment) the economy  will fall off the cliff and the idiots who vote for them may wake up and smell the roses. We will not get change if we continue to vote for the lesser of two evils.

    On the GOP side you get exactly (5.00 / 1) (#8)
    by inclusiveheart on Wed Jan 19, 2011 at 05:13:23 PM EST
    zero people who would have a problem with this situation.  On the Democratic side, you get at least some who are inclined to protect the rights of consumers and regular old people who aren't CEOs.

    So, from that standpoint, there's more hope on one side than on the other, imo.


    I don't disagree with you that there (5.00 / 2) (#27)
    by Anne on Thu Jan 20, 2011 at 09:57:56 AM EST
    may be a few Dems who come down on the side of the consumer/borrower, but they are largely voices in the wilderness, and I don't see much sign that those who are on the side of the banks are coming around to that point of view.

    And this isn't the only issue where we, the people, take a back seat to corporate interests, sad to say.  

    Not to be too crass about it, but your referene to "hope" brought to mind the old question: if you sh!t in one hand and put hope in the other, which one would fill up faster?


    That's Your Pitch ? (none / 0) (#26)
    by ScottW714 on Thu Jan 20, 2011 at 09:44:54 AM EST
    "We have some that are inclined to help."

    The thing that bothers me the most, it's true, that tint bit of hope keeps me coming back, never mind that fact that things will remain the same.


    It is my only fallback. (none / 0) (#34)
    by inclusiveheart on Thu Jan 20, 2011 at 10:36:02 AM EST
    I wouldn't hold it out as a pitch or even as particularly hopeful.  The reality is that the Democratic Party is a mess right now.  It isn't as horrible as the Republicans though.

    This year there is projected (none / 0) (#9)
    by Militarytracy on Wed Jan 19, 2011 at 07:00:00 PM EST
    to be another huge sweep of foreclosures, but the quick foreclosure is projected to be a thing of the past and most people will live in their homes for nothing for months and months after having lost their pride of ownership and actually caring for and about the property.

    If the consumer side of the coin had been tended to, someone would have cared for assets all the way around.  In the banks need and desire to screw everyone over though and hide their MBS crimes, they will now discover themselves taking one hell of a beating.  Or they can start making those calls now and renegotiating the loans that are still current for something that will keep those assets of value in someone's eyes.  They will never make those calls though, the bigshots will let everything go down on fire and just walk away from the situation if there aren't any more big bonuses for the them.

    Got an interesting bit in the mail (5.00 / 1) (#13)
    by ruffian on Wed Jan 19, 2011 at 09:02:46 PM EST
    the other day, for my late father. The holder of the 2nd mortgage on his house, whom he was behind on payments to ( he was in bankruptcy proceedings at the time of his death in October) offered to cut his principle by 70%. They must be getting really desperate. If they had done even half that a year ago it would have helped him a lot. I hope manynothers are getting similar letters.

    Thank you for the info (none / 0) (#17)
    by Militarytracy on Wed Jan 19, 2011 at 10:45:49 PM EST
    I'm thinking that many of us are going to have to renegotiate our loans at some point in the not too distant future.  When the economy in Gillette WY collapsed, it took awhile but banks began cramming down principal on those who were current on their mortgages in order to end walk aways.  They came to you with the offers, don't know if that will happen here....we may have to go to them.

    Of course, the MBS weren't set up with cramdowns in mind....another wrinkle in leveraged hell.


    Okay (none / 0) (#12)
    by jimakaPPJ on Wed Jan 19, 2011 at 08:40:40 PM EST
    What do we do when people can no longer pay, or don't want to pay because the mortgage is under water??

    I'm open for suggestions.

    But why should John and Peggy pay their loan when Bill and Sue are not??

    Reduce the payment by extending the life of the loan? Well, I'm sure there are millions of Johns and Peggys who would like the same.

    Reduce the payment by reducing the interest rate? Well, John and Peggy would like the same thing.

    Have the Feds buy down the loan to get it above water and have the banks refinance on the new balance?

    Well, John and Peggy would like the same thing.

    Do we claim that the housing industry cheated everyone?

    Does the buyer, who had to sign document after document in  the loan process, bear any responsibility??

    I mean There Aint No Such Thing As A Free Lunch.

    TANSTAAFL - Robert Heinlein circa 1952

    If John and Peggy are not underwater (5.00 / 1) (#15)
    by ruffian on Wed Jan 19, 2011 at 09:14:04 PM EST
    they can do all of those things right now. It is a great low interest rate time for John and Peggy. Who is stopping them?

    I think the bank bears at least equal responsibility as the buyer. Their loose lending practices inflated the bubble. They did not care because they were making their money by selling off the high risk mortgages. They knew they were doing that, and Bill and Sue did not. Bill and Sue  went into the deal with good faith that property values were honestly market driven. The bank should now split the underwater amount with Bill and Sue.


    If you can get refi with your depreciated (none / 0) (#18)
    by Militarytracy on Wed Jan 19, 2011 at 10:49:44 PM EST
    house...that is another wrinkle.  And houses are projected to deflate another 15% to 30% this year too.  We have gone back to old style mortgages now and that means down payments or existing equity.  So if your house can appraise in this economy for what you owe pluse the needed 20% equity...perhaps you can refi for those great rates.

    IF is a very big word (none / 0) (#20)
    by jimakaPPJ on Wed Jan 19, 2011 at 11:34:52 PM EST
    It's not that simple (none / 0) (#19)
    by jimakaPPJ on Wed Jan 19, 2011 at 11:34:17 PM EST
    John and Peggy are probably as stretched as can be so their credit rating will be a problem on a refi.
    Plus, when they look across the street and see a house that cost as much as their house but the buyers didn't pay anything down... etc., etc.

    It isn't simple, is it?

    Where the banks culpable? In some case yes. But how about the buyer? Is stupidity a valid reason for voiding a contract? If so, how can it be proved that all the buyers weren't stupid?? (It can't.)


    Another question is whether (5.00 / 2) (#23)
    by ruffian on Thu Jan 20, 2011 at 06:24:57 AM EST
    we are more interested in placing all the blame on one side- the borrowers- in which case the economy will not recover for years, or sharing it and getting things moving again. Neither of these couples are going to be buying furniture or making improvements to these bad investments anytime soon. Maybe the people down the street who owe nothing on their house own a local business that would reap the rewards if their neighbors were helped out with their problems.

    As for stupidity, the people could not have made the bad investments without help and approval from the bank. So the stupidity is shared. Why does only one side have to pay the price?


    Whever 'some people' (none / 0) (#24)
    by Harry Saxon on Thu Jan 20, 2011 at 07:28:28 AM EST
    talk about individuals vs. institutions, I'm reminded of this quote from Bertold Brecht:

    Some party hack decreed
    that the people had lost the government's confidence
    and could only regain it with redoubled effort.
    If that is the case, would it not be be simpler,
    If the government simply dissolved the people
    And elected another?

    One of the worst things (none / 0) (#25)
    by Militarytracy on Thu Jan 20, 2011 at 08:04:37 AM EST
    that happened was bankruptcy reform. Wall Street and the banks used it to refigure risk and not make themselves accountable in theory for risk they were taking.  They were going to make us all eventually pay in their minds and their algos.  It never occurred to them that in their greed they would blow themselves and all the rest of us up.  There are at least two responsible sides in my opinion in every business deal, and in every business deal either side could be the losing side and must consider that possiblity upon entering and inking a deal.  Refusing to entertain that possibility or to correctly analyze that risk is singularly the fault of that player.  That is business and is the nature of the market if anyone truly believes in the "market" concept.  The market will now punish bankers for their arrogance and greed as well as their insistance on poor regulation as people walk away.  Sometimes people will insist that greed is never punished by the market, but that isn't true IMO, and it has happened before and it will happen again.

    I haven't seen many bankers (none / 0) (#29)
    by jimakaPPJ on Thu Jan 20, 2011 at 09:59:14 AM EST
    frog walking to the pokey.

    RE:Asleep at the switch (none / 0) (#21)
    by Harry Saxon on Thu Jan 20, 2011 at 01:25:24 AM EST
    From that Commie-American blog, The Huffington Post:

    Earlier that year, during its June meeting, the Fed heard evidence that the market could be overvalued by as much as one-fifth, and Stockton's presentation to Greenspan and the FOMC cited evidence other than cable shows that the housing market was overheated.

    "[R]eports of cooling in the housing markets seem to me to be more frequent and more widespread than was the case six months ago," Stockton said. "As we noted in yesterday's Board briefing, a variety of indicators of housing activity have turned down in recent months. Household attitudes toward home buying have dropped sharply; builder ratings of new home sales have deteriorated; the index of mortgage applications for home purchase has fallen off; and the inventory of unsold homes has moved up. Taken in isolation, none of these measures has an especially reliable statistical relationship to housing activity. But taken together, they could be indicating that we are at the front edge of some cooling in these markets."

    Dean Baker, an economist who had spotted the housing bubble long before the Discovery Channel did, said that the wrong people have lost their jobs as a result of the Fed policy's failure. "It's amazing that it somehow never occurred to him/her that house prices would actually fall," he said in response to the "Flip That House" comment. "They should be fired for not recognizing this possibility and its implication."

    Click or Outscore Me

    In this case, the rot started from the head and spread its' way down.


    Caveat Emptor (none / 0) (#28)
    by jimakaPPJ on Thu Jan 20, 2011 at 09:57:57 AM EST
    is no longer taught.

    Never was taught enough.


    Caveat emptor (5.00 / 1) (#31)
    by Harry Saxon on Thu Jan 20, 2011 at 10:28:18 AM EST
    could've been the motto of the Gilded Age, and we all know how that turned out.

    So, if my grocer sells 9 lbs. 3 oz. of potatoes for a 10 lb price

    caveat emptor

    If my doctor decides to use me for an experimental study without my knowledge and permission

    caveat emptor.

    People who deliberately trick others dumber than themselves for their own profit and gain while producing moral hazard to boot, have a shelter in

    caveat emptor.

    Wiki Link:

    Click or Adore Me


    So a Republican is Argueing... (5.00 / 1) (#30)
    by ScottW714 on Thu Jan 20, 2011 at 10:02:22 AM EST
    ... that life must be fair ?

    Seems like you clowns are always arguing life ain't fair, if John and Peggy have lower rates should Bill and Sue be extended the same courtesy, same with wages or even be afforded a job, of course not.

    Must be nice to live in a bubble where things ain't fair until you need them to be to make a point, then everything should be equal.  The fact that you don't even recognize the very reason why one party is being foreclosed and the other isn't, is typical.

    My point, arguing two sets of non-existent, yet miraculously equal facts, is beyond lame.  There has to be a reason why Bill and Sue can't pay the mortgage, just because republicans want to believe that they just want to live for free, doesn't make it so.

    Quit pretending that people are just voluntarily deciding to stop making payments because it's inconvenient, and then using that claim to make a point about why one party deserves this or that.


    PPJ isn't a Republican (none / 0) (#32)
    by Harry Saxon on Thu Jan 20, 2011 at 10:29:19 AM EST
    he's too rich to need to sell out to them.

    It's not "either / or" (none / 0) (#33)
    by jbindc on Thu Jan 20, 2011 at 10:32:10 AM EST
    I can speak from my own family experience. My sister and brother-in-law have the worst credit imaginable.  Yet they somehow got a mortgage for a 3 bedroom condo 8 years ago.  There is no way they should have qualified.  They've missed payments, yet manage to stay one step ahead of foreclosure (mostly by borrowing money from family). My sister, as much as I love her, is lazy, and doesn't really want to work (even though they have no children to take care of at home) - she gets a job for a while, determines she's the only one doing work there but somehow never manages to hold onto a job for very long.  She's not stupid or incompetent - in fact, she's very smart.  I hate to say it, but she's just lazy and expects my brother-in-law to do all the money-making.

    Now, I don't want to see them lose their house, but they keep getting these great deals to refinance and get the latest round of government help.  So I think Jim has a point - why do they get to benefit from all of this, but someone else who actually is working and struggling, with better credit - why don't they?  Don't tell me those people don't exist.

    No, life isn't fair, but it seems that those that should get help first are the ones (who can) are trying to help themselves.  Otherwise - what's the incentive?


    who makes that judgement? (none / 0) (#35)
    by sj on Thu Jan 20, 2011 at 11:39:44 AM EST
    No, life isn't fair, but it seems that those that should get help first are the ones (who can) are trying to help themselves.

    Who decides if someone is trying to help themselves?  Or is lazy?  Or just doesn't have the skills?

    I think you have to just stop at "life isn't fair".  

    Switching gears here, I don't understand the banks' reluctance to cram down.  Okay so the amount of principle will be knocked down, but so what?  A mortgage is hugely profitable over the long term.  Especially that first 10 years.  The lender is still going to receive way more than they loaned out.  It's likely that they will not lose a cent from the loan itself.  Only that their profit will not be as great.  

    That's how it seems to me in my little layman's world.  Am I missing something?


    Speaking for myself (none / 0) (#38)
    by jbindc on Thu Jan 20, 2011 at 03:08:48 PM EST
    I think I'm in a perfectly good position to say that my sister is lazy when she is perfectly capable of going out to work, has an Associate's and a Bachelor's degree, and doesn't (or gets fired from ones she can get).  Add to that, she and my brother-in-law can always seem to find the money to buy cigarettes, or have the absolute latest in every technology as soon as it comes out, and she grocery shops at the local, high end market, yet their gas bill doesn't get paid for months at a time because "they can't afford it", and they owe my mom and two of my other sisters thousands of dollars.  

    I can't speak for everyone who is in this situation, but yeah - I DO wonder about the lender who gave them the original mortgage, and the lenders since who keep refinancing them.


    That's fine (none / 0) (#39)
    by sj on Thu Jan 20, 2011 at 04:13:12 PM EST
    You believe you know your sister.  I believe I know my sister.  But that isn't the point.  

    Their ability to have cigarettes available has nothing to do with how a potential borrower is evaluated.  It's a judgement that you are making because ... you know your sister.  

    Having outstanding loans from your sisters and your mother probably isn't going to go on a credit report.  It's something you know because ... you know your sister.

    If their gas bill wasn't paid for months at a time, then there was something that lenders can point to.  And based on that you could wonder about the financing.  And knowing that, and knowing that this information was likely readily available, I would say it's confirmation of corruption on the part of lenders.  Which, frankly, neither your sister nor your brother-in-law created.  

    You blame your sister because you are accustomed to blaming your sister.  She's not blameless in her lifestyle, but she didn't give herself the loan.

    So it's back to:  

    No, life isn't fair, but it seems that those that should get help first are the ones (who can) are trying to help themselves.

    Who makes that call?  The same corrupt institutions that did the loan in the first place?  I would hope not.

    Relatives?  Good heavens, I most certainly hope not.  

    I say treat all the same.  Some people are so worried that some "undeserving" soul might take advantage that they are willing to let everyone suffer.  

    Forget about it.  Life isn't fair.  After all, it also isn't "fair" that my neighbor across the street has a better interest rate than I do.  It's just what it is.


    I know (none / 0) (#40)
    by jbindc on Thu Jan 20, 2011 at 04:19:51 PM EST
    My sister and brother-in-law have tons of outstanding student loans, and at the time of the mortgage loan, had at least 19 credit cards maxed out - most of them in collections already.  On top of the loans from my parents and sisters.

    A lending facility could definitely look at that.


    Seems Like You Saying... (none / 0) (#36)
    by ScottW714 on Thu Jan 20, 2011 at 11:51:17 AM EST
    ... that is the mortgage company's fault, which  is what I would argue as well.  If I loan a homeless guy $10k and don't get paid, pretty hard to make the arguement that he is a deadbeat, I knew that going in, yet that's exactly what the memo is on the right side of the line.  In other words, blaming the poor for their bad decisions and as mentioned above, they have mitigated the financial consequences of their risky behavior.

    They have a zillion bad loans, yet all I hear from the right is about the deadbeats.  They made so many loans to obvious bad risk people and yet they are still finding ways to profit on their extremely risky behavior.  Where's the risk, lend just about anyone, nearly any amount, and expect to get paid, on time, with insane interest rates, and when you don't, feel free to cut corners and do just about anything you want without the government doing a damn thing about it.

    Of course when you look at each case and say well so-and-so is a deadbeat, it's easy to argue that they shouldn't be treated the same as others.  But then why do they have a home to begin with ?  Is there really a low-credit, low income person out their who is going to say no to home ownership ?  They are proven poor financial decision makers.  Did the banks really think that getting a home was going to all of a sudden make them responsible ?  No, they were going to roll that up into a giant asset and get one of their cronies to call it A-paper, not realizing that everyone was doing it and that bad mortgage was the norm, not the exception.  Making the big giant asset virtually worthless.

    It's not that I feel people should live for free, but at what point do the creators of this mess actually feel the pain the rest of us are.  And I do know, they shouldn't be allowed to cut corners and foreclose on homes they can't prove they own.


    The motive and opportunity for fraud (none / 0) (#41)
    by ruffian on Thu Jan 20, 2011 at 08:10:42 PM EST
    were right there, it is even hard to blame the mortgage companies for taking advantage. The mortgage securities market was screaming for high value-high risk loans. They know that if they tell a borrower the property is appraising at 150k instead of 100k, and hey look, we are approving you for 150k, the borrower will most likely take that deal. And they know borrowers have many sanctions against walking away from the debt even if it turns out later to be in their financial best interest when the property is only worth 100k. When the whole marketplace is rigged that way we can't expect any other result.