Geithner Admitted Administration Sacrificed Homeowners to ''Foam the Runway'' for Banks

[TiberiusB]

85. But the program was designed to sacrifice homeowners, because the banks designed it

H.A.M.P. was created by the banking industry as a counter to the cram down proposal originally expected to be included with the stimulus bill.

Cram down, obviously, didn't happen. The Obama Administration promised but never delivered.

Dick Durbin tried to re-introduce cram down into a housing bill and got absolutely no support from the White House (talk a good game and then disappear when the real fight goes down...hmmmm...sounds familiar).

H.A.M.P. essentially stripped the consumer friendly part of cram down, the part where mortgages could be re-negotiated before a bankruptcy judge, and left only the banks in charge of negotiations with under water customers. Needless to say, this transformed the whole program into just another bite at the tax payer apple for the banks that frequently left consumers worse off then when they started. Just "Google BofA and H.A.M.P."

It's easy to talk about how the economy desperately needs banks in the abstract while ignoring the glaring deficiency in the system that allowed the larger Wall Street Investment firms and mega banks like BofA to effectively turn the economy into a big casino with no downside to the wealthy players. Wall Street caused the crash in 2008, not bad mortgages. They were just the fuse, it was the bigger banks and Wall Street players like Goldman Sachs that pushed deregulation and rampant speculation courtesy of derivatives and credit default swaps that blew up the economy. Anybody trying to pretend that it was all about bad loans and Fannie Mae and Freddie Mac is just trolling.

Just imagine if the Fed had taken the 16+ trillion (possibly 29 trillion) it essentially gave away to pay off Wall Streets bad bets and instead funneled that money through a government program to set up distressed home owners with new loans at 2-3%. Even if you assume the low ball number of 16 trillion (and try to wrap you head around the idea that 16 trillion is the "low ball" estimate), that's, what, like $50,000 for every man, woman, and child in the U.S.? That's $200,000 for a family of four, which, with the average mortgage at something like $225,000, would be nearly enough to completely pay off any private bank loans, leaving only a low interest government loan that would allow consumers to drive more of their income into the general economy and not just into banker pockets. And that's assuming you hand out the money to everyone. Just imagine how much less would be necessary to take care of just the underwater mortgages.

Instead, the banks got the money and the housing crisis was left to fester. Dodd Frank was a weak tea fix and even that is slowly getting dismantled, effectively setting the stage for this all to happen again, only worse. It might have been more painful in the short term to take an axe to some of the bigger players and break them up via a government run liquidation, but in the long run, the results would be vastly better.

Don't even get me started on the effort to sell foreclosures to rich investors so they can be rented back to their former owners (which, yes, Obama backed).