Good Luck Out There, People

Before Obama’s election, Congress specifically authorized the executive branch, through the $700 billion bank bailout known as TARP, to “prevent avoidable foreclosures.” And Congress pointedly left the details up to the next president.

[...]

Obama and his administration must live with the consequences of that original sin, which contrasts with so many of the goals they claim to hold dear. “It’s a terrible irony,” said Damon Silvers, policy director and special counsel for the AFL-CIO, who served as deputy chair of the Congressional Oversight Panel for TARP. “This man who represents so much to people of color has presided over more wealth destruction of people of color than anyone in American history.”

[...]

By the time of Lehman Brothers’ failure in September 2008, defaults on subprime loans had spiked significantly. A critical mass of Democrats in Congress refused to agree to TARP unless some portion got devoted to keeping people in their homes. (The Obama Treasury Department would eventually devote $50 billion of TARP funds to this purpose, of which only $12.8 billion has been spent, more than five years later).

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The administration’s eventual program, HAMP, grew out of the banking industry’s preferred alternative [...] where the industry, rather than bankruptcy judges, would control loan restructuring. Unfortunately, the program has been a success for bankers and a failure for most hard-pressed homeowners.

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Both Senator Elizabeth Warren and former Special Inspector General for TARP Neil Barofsky revealed that then-Secretary Geithner told them HAMP’s purpose was to “foam the runway” for the banks. In other words, it allowed banks to spread out eventual foreclosures and absorb them more slowly. Homeowners are the foam being steamrolled by a jumbo jet in that analogy, squeezed for as many payments as they can manage before losing their homes.

[...]

The Obama administration’s most recent attempt at a solution is to loosen lending restrictions to jump-start the housing market. That trades financial instability for a short-term housing stimulus, and could put homeowners in significant peril. “Everyone’s on board with allowing debt to build up during a boom,” Sufi says, “but we now know afterwards, policymakers will leave people out to dry. You’re going to suffer losses and not get any forgiveness.”

  Bill Moyers

...but hey, do what you want...you will anyway.