This excerpt is from Professor Levitin, full post on Credit Slips:
Ezra Klein has joined the melee over the Obama Administration’s housing policy failure with an apologia for the Administration. Klein argues:
The right question on housing, then, is not whether the administration’s policies proved insufficient. They did. It’s what would have been better. And that’s not a question that either Appelbaum or Goldfarb conclusively answer. It’s not even a question that the most credible critics of the Obama administration’s housing policies conclusively answer.
In making this claim, Klein ignores a long list of the Administration’s critics who pushed hard and vocally for more pro-active policy alternatives. (I’m going to ignore the “conclusive” part of Klein’s restatement of the issue. If he wants critics to prove “conclusively” that an alternative would have been better, then nothing will suffice. We’re not dealing with a pick-your-own-adventure book where you can go back and try out different decisions.)
As far as what would have been better: gosh, there’s a list of potential interventions that very credible people were proposing. Here are a few:
(1) bankruptcy cramdown (proposed by numerous people, including Elizabeth Warren, and passed by the House)
(2) principal reductions as part of HAMP (urged by the Congressional Oversight Panel chaired by Elizabeth Warren and only belatedly added in a milquetoast way by Treasury)
(3) a new HOLC or the like (proposed by numerous people, including Joe Stiglitz, Howell Jackson, Ellen Seidman, and Rep. Brad Miller).
I’m sure I could come up with a much more complete list of “credible people” with minimal research. Which is the point–it doesn’t take much digging to see that Klein’s claim is plainly wrong. There’s no getting around the matter–the Administration truly flubbed things on housing policy, and its critics at the time said that the timid course of action would rebound to serious long-term economic problems and loom over the President as the 2012 election approached. It’s not like the Administration wasn’t warned repeatedly, directly, and credibly. The Administration instead chose to listen to a different group of “credible people,” and is paying the price.But while we’re on the topic of missed opportunities, there’s a huge one that’s been omitted from the list: the robosigning investigation. There have been three times when the Administration has had enormous leverage over the banks: the initial bailout, the first stress tests, and the robosigning investigation. Each time the Administration had the ability to force the banks to reduce principal or do whatever else it wanted, and each time it shied away. Bottom line here was that the Administration chose to protect the banks rather than deal with the losses in the housing market, and that’s not a decision it can disown.
Btw, while we’re on the housing policy issue, can anyone tell me what the Administration’s housing policy is now? As far as I can tell, we don’t have one