I wanted to circle back to this point I made on our foreclosure panel that I really do think expresses both the frustration and the danger I and some other commentators are feeling about the situation. Simply put, HAMP is hurting liberalism. It’s putting a face of bureaucratic incompetence on a program designed to help people. It’s making the lives of its participants worse while promising to make it better. It’s adding to their indebtedness and failing to reduce their principal.
Of course, we know that it’s not a liberal program in any way, with its maddening structure as a public-private partnership where the lender doesn’t have to make any changes to the mortgage unless they determine it in their best interest to do so. And that design was a conscious choice, not the result of legislative compromise. I have to laugh at that sliver of the liberal commentariat who constantly excuses the President and the Administration for having to make painful choices given the Congress they have. The President, you see, isn’t that powerful, and must work within those legislative constraints. But none of this is true with respect to HAMP. The Administration designed this entirely on their own, using money already appropriated. And they designed it terribly.
In fact, they lied right from the beginning, according to Sen. Jeff Merkley, who was also on the panel. He was told that the White House would devote $50-$100 billion in TARP money to homeowners and that they would fight for cramdown (what he would rather call lifeline bankruptcy) when it came up in Congress. These were the conditions under which Merkley voted to release the second tranche of the TARP money. And neither of these two things really came to pass. The White House stood mute as cramdown failed, and though HAMP is supposed to have $75 billion in backup, they’ve spent less than one-half of one percent of it.
Without the threat of a bankruptcy judge modifying the mortgage as a hammer on the side of homeowners to get lenders to comply, the HAMP design totally failed. It was no longer in the financial interest of the lenders to do anything, and so millions of people come into a system and get really nothing out of it. They end up more indebted and just float along, propping up the banks who don’t want to acknowledge the bad loans still on their books. This was the Administration’s design, specifically Gene Sperling’s design, according to reports. And as I said on the panel, he should be fired for the damage he’s causing. Obama is famous for saying he only cares about what works. Well, this isn’t working.
The more important damage is to those getting no relief on their mortgages, falling victim to predatory lending for the second time, first from the loan officers and now from the government. But on another level, it’s only confirming what Ronald Reagan famously said, that the most dangerous words in America are “I’m from the government and I’m here to help.” That’s true when a neoliberal, extend-and-pretend scheme designed more to save the banks from reality than help people gets implemented. Those people getting foreclosed or losing everything they’ve got can point the finger at one thing, that government didn’t provide a safety net for their struggles. As Elizabeth Warren said on the panel, in the 1930s we had a belief that government could step in and help us with our problems. And that has faded. It faded over the last thirty years with a coordinated demonization of government and it’s fading now because the group in the White House has a different worldview, one oriented toward the banks over the people. And so how can you tell the guy in this story to vote for Democrats ever again?
At the foreclosure panel I went to, HuffPo’s Ryan Grim, who had been inteviewing people around town, told the story of a 50something guy who was going to lose a house he’d put $100K down on. A lot of the Tales Of Foreclosure Hell have focused on people who bought houses with little money down and who therefore in some sense didn’t lose much, but there are a lot of people who did lose/will lose their life savings over this.
I get the occasional angry email because I’m not hopey changey enough, but right now I’m angry at the administration over HAMP. It was their baby, it didn’t require Congressional action of any kind, and when it was introduced the usual suspects said it was unlikely to help people. More than that, it’s actually hurting people, extracting payments during the extend and pretend period before finally chucking people out.
Ironically, that guy did say he’d vote for Harry Reid over Sharron Angle. But over time, he knows that the government did not step in to help when his work dried up and everything he worked so hard to create went away. And millions of people join him in that belief. And so the idea of government as a backstop for those facing troubled times, as a great equalizer between the average people and the seats of power, just crumbles.
I was talking to Jack Conway, the Senate candidate from Kentucky, and he said that the biggest issues from constituents on the campaign trail are spending and jobs. I asked if he explains that the two are contradictory, and he explained that people don’t see it that way, that they’ve concluded that more public spending will not create jobs but just go to the banks on Wall Street. I don’t know if the Administration understands how pernicious this game they’re playing is. It could last for a generation.
This program is not just a terrible deal for struggles homeowners – it’s a terrible confirmation of government not working. It needs to stop and those responsible need to be fired, before it consumes the entire progressive project in its wake.
UPDATE: Gene Sperling may not have been as intimately connected with the design of HAMP, the Home Affordable Mortgage Program, as I and others have reported. We’re still working on this one.