Eschaton: The Big Picture: Even if we believe the premise that, say, everything was done with the banksters in mind, it doesn't mean that the banksters, or the subset of them dealing with housing issues, or their lobbyists, really have a big picture sense of what's good for them. You know, their model shows how doing X will give them a bunch of extra money on some set of mortgage securities, but doesn't take into account that throwing millions of people out of their homes might cause them some additional problems.
I don't actually assume that Our Galtian Overlords actually know what they're doing most of the time.
Eschaton: Hope or Hopeless: The administration has been horrible on housing…. I think they've been horrible from the perspective of all of the stakeholders, though thinking, perhaps, of some stakeholders more than others in the process. Happy they're improving, not convinced it's real.
And Neil Barofsky:
Tim Geithner’s principal hypocrisy: Last week the acting director of the Federal Housing Finance Agency, Ed DeMarco… announced that he would not approve the Obama administration’s request that struggling borrowers whose mortgages are backed by Fannie Mae and Freddie Mac receive debt relief through principal reductions subsidized by the Troubled Asset Relief Program (TARP). DeMarco’s refusal was based on his concern that granting such relief would encourage other borrowers to “strategically default”….
This is not the first time this debate is happening – but last time around, Geithner was the one arguing DeMarco’s points…. [N]o one should be fooled that the administration’s entreaties to DeMarco are anything but political posturing…. Treasury Secretary Timothy Geithner, using the same justifications now offered by DeMarco, consistently blocked efforts to use TARP funds already designated for homeowner relief through a principal reduction program that could have a meaningful impact on the overall economy….
Geithner avoided this path to a housing recovery, explaining that he believed it would be “dramatically more expensive for the American taxpayer, harder to justify, [and] create much greater risk of unfairness.” Treasury amplified that argument in 2010, after it reluctantly instituted a weak principal reduction program in response to overwhelming congressional pressure. That program incongruously left it to the largely bank-owned mortgage servicers (and to Fannie and Freddie) to determine if such relief would be implemented. In response to our criticism that the conflicts of interest baked into the program would render it ineffective unless principal reduction was made mandatory (when in the best interests of the holder of the loan), Treasury reinforced Geithner’s early statements, refusing to do so primarily because of fears of a lurking danger: the ”moral hazard of strategic default.” The message was clear: No way, no how would Treasury require principal reduction, even when Treasury’s analysis indicated it would be in the best interest of the owner, investor or guarantor of the mortgage….
Which is why it should not be surprising that rather than engage in bold action, such as replacing DeMarco with a recess appointment, the administration has responded with only a letter…. [T]he administration – whether through principal reduction or otherwise – has never prioritized coming up with an effective approach to helping homeowners and reviving the housing market, even when it had a multi-hundred-billion-dollar TARP war chest at its disposal….
This is not a conversion – it is a political convenience. Geithner may well be correct when he wrote in a letter to DeMarco that an effective principal reduction program would “help repair the nation’s housing market” and that the refusal to do so is not “in the best interest of the nation,” but it is his own policies that are primarily to blame for where we are today…. Geithner wrote this week to Demarco: “You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis.” If only he had heeded his own advice.