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More On How Tim Geithner Contributed To The Destruction Of America

By Big Tent Democrat

“I will change our bankruptcy laws to make it easier for families to stay in their homes,” [Barack] Obama told supporters at a Colorado rally on September 16, 2008, the same day as the bailout of AIG. [. . .] Obama promised to change that, describing it as exactly “the kind of out-of-touch Washington loophole that makes no sense.”

You know about Tim Geithner's disgraceful tenure as head of the New York Fed. You know about Tim Geithner's disgraceful performance on the 2009 stimulus. You know about Geithner on AIG, TARP and HAMP. Now, via Atrios, Pro Publica reports on Geithner's malfeasance on bankruptcy cramdown for primary residences:

W]hen it came time to fight for the measure, he didn’t show up. Some Democrats now say his administration actually undermined it behind the scenes. “Their behavior did not well serve the country,” said Rep. Zoe Lofgren (D-CA), who led House negotiations to enact the change, known as “cramdown.” It was “extremely disappointing.”

Tim Geithner pushed for the disastrous HAMP program instead (HOLC was not even discussed.):

[T]he administration has relied on a voluntary program with few sticks, that simply offers banks incentives to modify mortgages. Known as Home Affordable Modification Program, or HAMP, the program was modeled after an industry plan. The administration also wrote it carefully to exclude millions of homeowners seen as undeserving.

HAMP is, of course, an abject failure. To have ANY chance of working, a stick needed to be applied to the banks:

To force those servicers to modify mortgages, advocates pushed for a change to bankruptcy law giving judges the power not just to change interest rates but to reduce the overall amount owed on the loan, something servicers are loath to do. [. . .] They thought cramdowns would serve as a stick, pushing banks to make modifications on their own.

The Obama Administration worked against this provision despite its public pronouncments:

In the fall of 2008, Democrats saw a good opportunity to pass cramdown. The $700 billion TARP legislation was being considered, and lawmakers thought that with banks getting bailed out, the bill would be an ideal vehicle for also helping homeowners. But Obama, weeks away from his coming election, opposed that approach and instead pushed for a delay. He promised congressional Democrats that down the line he would “push hard to get cramdown into the law,” recalled Rep. Miller.

Four months later, the stimulus bill presented another potential vehicle for cramdown. But lawmakers say the White House again asked them to hold off, promising to push it later. An attempt to include cramdown in a continuing resolution got the same response from the president.

"Manana" from the Obama Administration means "never:"

Privately, administration officials were ambivalent about the idea. At a Democratic caucus meeting weeks before the House voted on a bill that included cramdown, Treasury Secretary Tim Geithner “was really dismissive as to the utility of it,” said Rep. Lofgren.

[. . .] Treasury staffers began conversations with congressional aides by saying the administration supported cramdown and would then “follow up with a whole bunch of reasons” why it wasn’t a good idea, said an aide to a senior Democratic senator.

Homeowners, Treasury staffers argued, would take advantage of bankruptcy to get help they didn’t need. Treasury also stressed the effects of cramdown on the nation’s biggest banks, which were still fragile. The banks’ books could take a beating if too many consumers lured into bankruptcy by cramdown also had their home equity loans and credit card debt written down.

(Emphasis supplied.) Tim Geithner has always been the banks' creature.

And of course, the timidity of the Obama Administration is now so commonplace that we do not even remark on it. It was disastrous here. Consider the Obama Administration's fear of Rick Santelli:

The program was further limited by the administration’s concerns about using taxpayer dollars to help the wrong homeowners. The now-famous “rant” by a CNBC reporter, which fueled the creation of the Tea Party movement, was prompted by the idea that homeowners who had borrowed too much money might get help.

Candidate Obama had portrayed homeowners in a sympathetic light. But the president struck a cautious note when he unveiled the plan in February 2009. The program will “not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans,” said Obama. “It will not reward folks who bought homes they knew from the beginning they would never be able to afford.”

The destruction of America continues apace:

A lot of the program is focused on “weeding out bad apples,” said Steven Horne, former Director of Servicing Risk Strategy at Fannie Mae. “Ninety percent is not focused on keeping more borrowers in their homes.”

And not only do we have a housing crisis because of Tim Geithner and Barack Obama's refusal to take on the banks and make them face the music, the American economy is now in a semi-permanent downward spiral. Just wait until Grover Norquist gets his way this year.

Speaking for me only

Full post as published by TalkLeft on February 04, 2011 (boomark / email).