No hope and change for mortgage relief
by digby
If you've been reading Dave Dayen's work over the past few years (and I know you have) then you already know the details of what went wrong with housing policy in half a dozen different ways. It's not a pretty picture. Today legislative expert Sarah Binder summarizes one of the more depressing aspects of the failure: the administration's strange unwillingness to push for "cramdown" --- the mortgage relief program which had been widely assumed, even by the banks, to be a done deal:
As journalists’ accounts suggest, however, the administration never leaned in. Accounts in Pro Publica and the New York Times, for example, raise doubts about the administration’s commitment to the cramdown proposal. As former assistant Treasury secretary Michael Barr has noted, “There wasn’t enough political capital, time or energy.” Democratic lawmakers had a similar impression. As Blue Dog former member Rep. Jim Marshall (D-Ga.) who sponsored the December cramdown effort observed, “We would propose that this stuff be included and they kept punting.” The Obama White House reportedly discouraged lawmakers from including cramdown in the sure-to-pass stimulus bill in February 2009, and candidate Obama had previously persuaded Democrats to keep it out of the must-pass TARP bill during the 2008 campaign. Moreover, former chairman of the Senate banking panel, Chris Dodd (D-Conn.), noted the intense lobbying of community bankers, a group deeply rooted in most congressional districts. With their opposition, Dodd said, “you don’t win much.” Finally, in The Washington Post’s account, Geithner dismissed the utility of debt relief for homeowners, suggesting that it would do more economic harm than good.
In Stress Test, Geithner makes a far broader claim about the economic necessity of saving Wall Street– rather than fundamentally reforming it. He dismisses more politically palatable solutions as the “central paradox” of financial crises: “What feels just and fair is often the opposite of what’s required for a just and fair outcome.” For now, put aside whether lessening household debt with unspent TARP funds would have precluded a just and fair outcome if coupled with the Wall Street bailout. I think it’s fair to say that the cramdown episode highlighted the administration’s discomfort with more aggressive financial reform (reflecting the views of the Wall Street wing of the Democratic Party).
The White House seemed to prefer working within existing political constraints rather than challenging them. Channeling public anger in the wake of the financial crisis seems not to have been a White House priority. With a still sluggish housing recovery today, one wonders about the longer-term economic consequences of that political choice.
The White House seemed to prefer working within existing political constraints rather than challenging them.
Think about that. And then remember this:
We are looking for more than just a change of party in the White House. We're looking to fundamentally change the status quo in Washington.
It's a status quo that extends beyond any particular party and right now that status quo is fighting back with everything it's got, with the same old tactics that divide and distract us from solving the problems people face, whether those problems are health care that folks can't afford or a mortgage they cannot pay.
So this will not be easy. Make no mistake about what we're up against. We're up against the belief that it's all right for lobbyists to dominate our government, that they are just part of the system in Washington.
But we know that the undue influence of lobbyists is part of the problem and this election is our chance to say that we are not going to let them stand in our way anymore.
We're up against the conventional thinking that says your ability to lead as president comes from longevity in Washington or proximity to the White House. But we know that real leadership is about candor and judgment and the ability to rally Americans from all walks of life around a common purpose, a higher purpose.
That was from January, 2008. And, in fairness, he also said that he wanted to work with Republicans and was going to usher in a new era of bipartisanship, so it's not as if he lied about what approach he was going to use to achieve these goals.
It didn't work out.
But I don't think most people thought that guys like Tim Geithner, who believed that "saving" Wall Street meant that many millions of average people would have to suffer needlessly while the perpetrators of the crisis continued to prosper (hugely) would be who this president would rely upon to guide him.
Update: Also too: Geithner presenting saving rather than reforming Wall Street as "the central paradox" ---which evokes the Keynesian paradox that recommends spending in a recession --- is offensive. One might ask him what exactly he means by a "just and fair outcome."