Decisions Were Made

This Time Isn’t Different Because the Banks Made That Decision by David Dayen at FireDogLake, full article on this link:

Let’s set aside this alibi of “bad politics” and look at the facts here.  The Administration set aside $75 billion through TARP for HAMP, and to date have used $1.6 billion or so on a program that is effectively irrelevant at this point (and they have cleverly revised history to claim that it was only a $50 billion allotment, to make this look a little better).  Without any need to clear Congress, the Administration had all the authority they needed to put this $75 billion to work, including the ability to punish servicers who failed to comply with guidelines.  They didn’t have to design the program as voluntary on the part of the banks to begin with.

Then, for two years, Treasury swore up and down there was nothing they could do to punish servicers who didn’t comply.  Finally, a few months ago, they started withholding incentive payments for noncompliance, as if they just magically acquired the power.  It turns out, as Paul Kiel from Pro Publica displayed in a story this week, that Treasury wasn’t even checking on servicer compliance for at least the first year of the program.  AG Catherine Cortez Masto of Nevada is suing Bank of America in part for claiming to work with borrowers on loan modifications while foreclosing on them at the same time.  This is well within the Justice Department’s purview if they chose to use the authority, and at the least, Treasury could force compliance with their own contracts.

If the theory is that no bank would agree to the terms of the contracts if they included the ability to be punished, then there’s certainly ways to use the full $75 billion rather than 2-3% of it by simply increasing the incentives to reverse the clear incentives by mortgage servicers to foreclose, or by using the funds entirely on third-party counseling and mediation programs, which have been massively more successful on the local level than anything from HAMP.

The truth that emerges from all of these facts is that the Administration had no interest whatsoever in using more than a token amount of the TARP authority they had already husbanded for mortgage relief and foreclosure mitigation.  They wanted to run, and did run, an extend and pretend scheme, a form of predatory lending, to squeeze out additional payments from borrowers on whom banks would eventually foreclose.  The one fly in this ointment is that the banks had no way to prove ownership of the underlying loans.  If they didn’t break the residential housing market in this fashion, that would have “worked,” to the detriment of millions of homeowners whose life savings were taken away to prop up zombie banks.

. . .

The idea that policymakers are protecting banks from insolvency on the grounds that it’s cheaper to preserve the shitty economy banks are helping to provide, millions of people be damned, stands as a pretty good reason why thousands of people are occupying public spaces all over the country right now, to protest the corrupt partnership of finance and government, at their expense.


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