history", according to policy director AFL-CIO.
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A Needless Default
American Prospect
Winter 2015 issue
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President Obama will carry several legacies into his final two years in office: a long-sought health care reform, a fiscal stimulus that limited the impact of the Great Recession, a rapid civil rights advance for gay and lesbian Americans. But if Obama owns those triumphs, he must also own this tragedy: the dispossession of at least 5.2 million U.S. homeowner families, the explosion of inequality, and the largest ruination of middle-class wealth in nearly a century. Though some policy failures can be blamed on Republican obstruction, it was within Obama’s power to remedy this one—to ensure that a foreclosure crisis now in its eighth year would actually end, with relief for homeowners to rebuild wealth, and to preserve Americans’ faith that their government will aid them in times of economic struggle.
Faced with numerous options to limit the foreclosure damage, the administration settled on a policy called HAMP, the Home Affordable Modification Program, which was entirely voluntary. Under HAMP, mortgage companies were given financial inducements to modify loans for at-risk borrowers, but the companies alone, not the government, made the decisions on whom to aid and whom to cast off.
In the end, HAMP helped only about one million homeowners in five years, when ten million were at risk. The program arguably created more foreclosures than it stopped, as it put homeowners through a maze of deception designed mainly to maximize mortgage industry profits. More about how HAMP worked, or didn’t, in a moment.
HAMP cannot be justified by the usual Obama-era logic, that it represented the best possible outcome in a captured Washington with Republican obstruction and supermajority hurdles. 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. Swing senators like Olympia Snowe (Maine), Ben Nelson (Nebraska), and Susan Collins (Maine) played no role in HAMP’s design.
It was entirely a product of the administration’s economic team, working with the financial industry, so it represents the purest indication of how they prioritized the health of financial institutions over the lives of homeowners.
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.”...
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http://prospect.org/article/needless-default
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