HAMP'D: How Geithner May Cost Obama Reelection

By Big Tent Democrat, Section Economy
Posted on Fri Apr 29, 2011 at 11:03:09 AM EST
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Atrios:

As I've said many times, if the economy fails to turn around sufficiently in time for the election it will in large part due to the failure of HAMP. It was bad in that it screwed a lot of individuals and failed to help enough, but it was also bad because it failed to help the macroeconomy.

From the rortybomb link:

Gagnon earlier in his talk said that “one of the biggest goals [. . .] was to push down the mortgage rate to spark a refinancing boom to encourage households and enable households to reduce their expenditures and repair their balance sheets and be able to spend again. That worked not quite as well as we hoped because the administration’s program for getting underwater borrowers to borrow didn’t work and I think that’s a true disaster that has no excuse. I have nothing but [. . .] blame [for] the administration on not doing this[ . . .] This could have been a huge success. [. . .]" I haven’t heard this critique before and I thought it was really interesting.

(Emphasis supplied.) I know rortybomb does not read TalkLeft but Atrios has only written about this about a gajillion times. Weird that he says he has not heard this critique before.

Speaking for me only

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HAMP'D: How Geithner May Cost Obama Reelection | 40 comments (40 topical)

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Why on (5.00 / 3) (#1)
by Ga6thDem on Fri Apr 29, 2011 at 11:07:08 AM EST

earth did anyone think that people who were underwater were even going to be able to borrow money? I mean if your house is worth 150k and you owe 200K on it, who is going to give you a loan for 200K?

The only way this would have worked would have been to have an HOLC which handled these special cases.

Not sure why that is so hard to understand (5.00 / 2) (#4)
by ruffian on Fri Apr 29, 2011 at 11:19:13 AM EST

Interest rates are not the problem. Property 'value' is the problem.


But if property values are a problem (none / 0) (#5)
by Militarytracy on Fri Apr 29, 2011 at 11:22:36 AM EST

All those securitized mortgages are in trouble. That market as a whole has had a certain amount of its wealth evaporate. So we will not acknowledge that, and if Wall Street seems to be happy today we are all happy today.


Yup - what I can't figure out, or remember (none / 0) (#6)
by ruffian on Fri Apr 29, 2011 at 11:27:27 AM EST

is who ended up with all those toxic mortgage securities?


I think we did (5.00 / 1) (#7)
by Militarytracy on Fri Apr 29, 2011 at 11:29:13 AM EST

On Geithner's deathbed we will have the proof if he has a soul :)


: Well, at least S&P finally go around to (5.00 / 1) (#13)
by ruffian on Fri Apr 29, 2011 at 12:41:45 PM EST

rating those securities correctly - once they got to be part of the national portfolio and not their buddies at the banks!

Another one of the many things (none / 0) (#3)
by Militarytracy on Fri Apr 29, 2011 at 11:12:57 AM EST

they refused to consider, that people were so upsidedown in their homes after the market took a correction that they couldn't a new loan :)


Good grief (5.00 / 3) (#8)
by Ga6thDem on Fri Apr 29, 2011 at 11:31:20 AM EST

It's really pathetic that me who has a lowly four year business degree can figure this crap out but it eludes these supposed "geniuses".


I think MT is right - the people in charge don't (5.00 / 4) (#9)
by ruffian on Fri Apr 29, 2011 at 11:35:06 AM EST

want to know...no excuse for the reporters, bloggers, etc. though

Maybe people in parts of the country that have not been as hard hit as ours really don't know the extent of the problem.


Well (5.00 / 1) (#10)
by Ga6thDem on Fri Apr 29, 2011 at 11:38:09 AM EST

there's certainly a point to that way of thinking.

Heck, I'm so confused about what they are doing I can't decide whether they're a bunch of idiots or they are brilliant at convincing us they are a bunch of idiots who can't "do anything".


My daughter is undewater with a Wells (none / 0) (#32)
by hairspray on Fri Apr 29, 2011 at 11:08:24 PM EST

Fargo loan that is way beyond what her house is now worth and they have jerked her around for over a year. It has been a nightmare of lost paperwork and no accountability from the bank. She has submitted paper work at least 5 times to nameless people with 800 phone numbers. They will not give her a case manager and denied her HAMP although she has had a good job for 14 years with a good salary until the crash when she lost 30% of her income and 30% of her home value. She meets the guide lines but they keep focusing on some snall detail that is so immaterial. Something about how the right hand doesn't know what the left hand is doing is fishy. In the meantime my daughter is so anxious and sick of this whole mess she is suffering.


: I'm very sorry to hear that (none / 0) (#36)
by sj on Sat Apr 30, 2011 at 02:29:42 AM EST

These stories make me feel so helpless.

Maybe the country needs to follow (5.00 / 6) (#12)
by MO Blue on Fri Apr 29, 2011 at 12:14:39 PM EST

some of the policies that Reagan actually pursued to help the recovery.

But following his party's losses in the 1982 election, Reagan largely backed off his efforts at spending cuts even as he continued to offer the small-government rhetoric that helped get him elected. In fact, he went in the opposite direction: His creation of the department of veterans affairs contributed to an increase in the federal workforce of more than 60,000 people during his presidency.
And while Reagan somewhat slowed the marginal rate of growth in the budget, it continued to increase during his time in office. So did the debt, skyrocketing from $700 billion to $3 trillion. Then there's the fact that after first pushing to cut Social Security benefits - and being stymied by Congress - Reagan in 1983 agreed to a $165 billion bailout of the program. He also massively expanded the Pentagon budget.
Meanwhile, following that initial tax cut, Reagan actually ended up raising taxes - eleven times. That's according to former Republican Sen. Alan Simpson, a longtime Reagan friend who co-chaired President Obama's fiscal commission that last year offered a deficit reduction proposal.
...
"Ronald Reagan was never afraid to raise taxes," historian Douglas Brinkley, who edited Reagan's diaries, told NPR. "He knew that it was necessary at times. And so there's a false mythology out there about Reagan as this conservative president who came in and just cut taxes and trimmed federal spending in a dramatic way. It didn't happen that way. It's false." link

Recap:

o Backed off his efforts at spending cuts
o Increased the federal workforce
o Increased debt from $700 billion to $3 trillion
o Targeted money to safety net programs
o Increased taxes 11 times.

This was meant to be a reply to (none / 0) (#14)
by MO Blue on Fri Apr 29, 2011 at 12:50:04 PM EST

Abdul Abulbul Amir's comment #11 comparing Reagan's recovery to Obama's recovery. Must have hit the wrong button somehow for it to become a stand alone comment.


You can talk about the gas tax and that (none / 0) (#31)
by jimakaPPJ on Fri Apr 29, 2011 at 09:45:25 PM EST

tax and those taxes all you want to...

But what Reagan did that boosted the economy into warp drive was cut FIT rates.

That is what he is beloved and remembered for by the millions who was actually able to start buying a piece of America with the extra cash they had.


Re: Myths and other stories (none / 0) (#33)
by Harry Saxon on Fri Apr 29, 2011 at 11:12:00 PM EST

Another major myth: Reagan cut taxes on all Americans, and that led to a great expansion.
Here's the truth: the total federal tax burden increased during the Reagan years, and most Americans paid more in taxes after Reagan than before. The "Reagan Recovery" was unremarkable. It looks great only contrasted against the dismal Reagan Recession -- but it had nothing to do with Supply Side voodoo.
With a red ink explosion -- $300 BILLION deficits looming as far as the eye could see -- GOP Senators, notably including Bob Dole, led the way on tax hikes. The economy enjoyed its recovery only after total tax increases larger than the total tax cuts were implemented. Most importantly, average annual GDP growth during the Reagan 80s was lower than during the Clinton 90s or the JFK-LBJ 60s!

American Politics Journal Link

HORSLEY: Reagan's budget director, David Stockman, explains the 1981 tax cut blew a much bigger hole in the federal budget than expected. So over the next few years, Reagan agreed to raise taxes again and again, ultimately undoing about half the savings of the '81 cut.
Mr. DAVID STOCKMAN (Former Director, Office Management and Budget): He wasn't very happy about it. He did it reluctantly. But at the end of the day, the math was overwhelming.
FLINTOFF: That's because Reagan was never able to match his 1981 tax cuts with a comparable cut in federal spending. A modest reduction in domestic spending was dwarfed by Reagan's big buildup in the Pentagon budget. And, Stockman says, Reagan never made a serious effort to challenge middle class entitlement programs, after an early proposal to curtail Social Security benefits was shot down.
Mr. STOCKMAN: The White House and President Reagan himself retreated within three days when it became clear the enormous political resistance that would occur if you were going to cut entitlements.
FLINTOFF: And without big spending cuts, Reagan faced a choice between raising taxes and an even bigger federal debt. He chose the tax hikes. Today the federal debt's bigger than ever, and policymakers are again staring at painful choices. President Obama's fiscal commission says both deep spending cuts and tax increases will be needed to bring the budget under control. But ever since Reagan, presidents who've tried to raise taxes are confronted with the myth of their tax-cutting predecessor.

NPR Link

Reagan economist suggest interest rate cuts drove economic recovery. Michael Mussa, a member of Reagan's Council of Economic Advisers, wrote in an essay for American Economic Policy in the 1980s (University of Chicago Press, 1995) that when the Federal Reserve cut the discount rate a half percentage point on July 20, 1982, it "signal[ed] the beginning of what would become a four-and-a-half-year period of quite rapid monetary expansion. During this period, interest rates, both short and long term, would be driven significantly lower, and the U.S. economy would substantially recover from the devastation of both inflation and recession."

Media Matters Link

480 Words.


please stop reprinting (none / 0) (#34)
by Jeralyn on Fri Apr 29, 2011 at 11:44:49 PM EST

material you find elsewhere. Link, quote a short paragraph, and make your point. This is at least the fourth time I've asked you to stop doing this.


: One source, one paragraph (none / 0) (#37)
by Harry Saxon on Sat Apr 30, 2011 at 04:26:32 AM EST

from hence on.

Reaganomics at it's worst (5.00 / 2) (#15)
by mmc9431 on Fri Apr 29, 2011 at 12:59:13 PM EST

There was never a chance at an economic recovery as long as the housing market was allowed to collapse. It's by far the largest "investment" most people will ever make. Millions of people have seen their entire life savings go down the drain. Many are too old to regroup if and when the economy ever returns.

Again Washington chose the trickle economy mode. Save the big banks and the little people will benefit from the trickle.

And again it was a failure.

: Clintonomics at it's best (none / 0) (#40)
by Rojas on Sat Apr 30, 2011 at 03:35:52 PM EST

You can be a banker or a builder but not a candlestick maker. The first two are joined at the hip.
As Stiglitz points out, all that cash from QE is going to Asia where the good opportunities are. China has a booming real estate market, is it a bubble? Who cares, they just keep shoveling cash to the gluttons and if it all goes boom again, they will feel no pain.

A picture of what is happening on (5.00 / 1) (#16)
by MO Blue on Fri Apr 29, 2011 at 01:01:45 PM EST

the economy from the perspective of the lower 98%.

McDonald's and its franchisees hired 62,000 people in the U.S. after receiving more than one million applications, the Oak Brook, Illinois-based company said today in an e-mailed statement. Previously, it said it planned to hire 50,000.

The new U.S. mantra: Johnny, if you work real hard maybe when you grow up you can get a job working behind the counter at McDonalds.

The other story is that the CEO of Walmart says many of its customers, who live paycheck to paycheck, seem to be running out of money much earlier in the month. From CNN:
Lately, they're "running out of money" at a faster clip, he said.
"Purchases are really dropping off by the end of the month even more than last year," Duke said. "This end-of-month [purchases] cycle is growing to be a concern.
[...]
To that end, Duke said he's not seeing signs of a recovery yet.

Source: h/t FDL/Bloomberg/CNN

: Pathetic (5.00 / 1) (#18)
by mmc9431 on Fri Apr 29, 2011 at 01:13:54 PM EST

What a sad testament to the American dream.
Maybe the economic wizards in DC can figure out how someone is supposed to exist (living is too strong a word) on the salaries that they're driving everyone to.

: And yet (none / 0) (#17)
by sj on Fri Apr 29, 2011 at 01:09:54 PM EST

somehow I doubt that they'll consider increasing pay to their employees...

If Geithner... (5.00 / 1) (#19)
by kdog on Fri Apr 29, 2011 at 01:15:43 PM EST

and his band of thieves don't cost him, the energy market gamblers will.

If gas is still anywhere near 4.25 a gallon come next November, and heating oil is also nutso come next winter and fall 2012, its gonna be bad news for any and all incumbents...the sucked-dry Joes and Janes are gonna need fall persons...and they haven't figured out or refuse to do what is necessary to hold the gamblers and banksters accountable...that leaves their elected cronies holding the bag come election day.

At what point does Obama, who named (5.00 / 2) (#22)
by Anne on Fri Apr 29, 2011 at 03:50:45 PM EST

Geithner to Treasury, and who has not had one peep of disagreement with Geithner, have to point the finger at himself?

Does Obama think HAMP is working because Geithner tells him so? Is there no one in the WH who has the balls to tell Obama that it's not working? Or do they think, collectively, that it IS working - to make the servicers tons of money, and keep the banks' and Wall Street's little - or not so little - charade going on the value of their assets?

What I would really like to know is, did Bank of America think up all by its lonesome that it would be a good idea to modify the mortgages of military members, taking the principal down to current market value, to help someone's political fortunes and allow them to tell us how very hard they were working and how very much they cared?

And Bank of America's program for military personnel reduces principal to 100% of the current market rate. This is particularly notable, since just a day before instituting the program, Bank of America CEO Brian Moynihan rejected principal reductions for the bank's underwater borrowers, calling them "unworkable" and unfair. Moynihan stated, "There's a core problem that if you start to help certain people and don't help other people, it's going to be very hard to explain the difference."
Yet that's what the entire mortgage industry is doing. And the reason for it is simple. The banks know that the military is one of the only widely respected institutions left in the country, and well-publicized instances of abuse of service members will cause a far bigger backlash than they have experienced to this point. What's more, evidence of wrongful foreclosures on the military will lead to further scrutiny of their actions with other borrowers.
This is what you could call "camo-washing," similar to the greenwashing that corporations employ to create an appearance of attentiveness to environmental issues. The banks bend over backwards for the benefit of members of the military they have wronged, to distract from the fact that they're not doing the same for millions of others. It also works to enhance their public image, positioning them as sympathetic and responsible, willing to make good when they screw up.

Because I think it's unconscionable (as if these banks and corporations have any idea what it means to even have a conscience) to ignore the plight of civilians caught up in foreclosure hell, and keep talking out of both sides of their mouths on what they can and cannot do.

Geithner isn't Obama's problem, Obama is Obama's problem. And they're both our problem.

Well (5.00 / 1) (#25)
by Ga6thDem on Fri Apr 29, 2011 at 04:06:29 PM EST

I have read that Obama has surrounded himself with a bunch of sycophants so it very well may be that no one can tell him or wants to tell him the truth.


: Not only 'sycophantic' (none / 0) (#38)
by Nemi on Sat Apr 30, 2011 at 06:22:24 AM EST

but whenever I see any of them on a show like, say The Daily Show, they come off as if on speed. Totally over the top exulted by the magnificence of this president/ presidency. Painful and embarrassing to witness.

Physician's assistant @ (5.00 / 2) (#30)
by oculus on Fri Apr 29, 2011 at 07:12:15 PM EST

ENT office yesterday might as well have been a TL commenter. Has no respect for Geithner. Thinks his kids future has been seriously impacted by mortgage scam etc. Two kids starting college incurring ridiculously high loan obligations w/very poor job prospects.

Did you inform them (2.67 / 3) (#35)
by Rojas on Sat Apr 30, 2011 at 01:04:27 AM EST

that there is a pretty secure future in putting poor people in jail and defending police against civil rights violations?


: Buzz off. (3.00 / 2) (#39)
by oculus on Sat Apr 30, 2011 at 01:51:44 PM EST

They (Timmeh) have too much to hide (none / 0) (#2)
by Militarytracy on Fri Apr 29, 2011 at 11:11:17 AM EST

to work with people on their homes. If people refi at a lower interest rate on a large scale what happens to the securitization market? And they can't afford much scrutiny there because that is all such a mess that if unwound in any way everyone could look at...they will all be naked and some blatant lawlessness would probably be exposed too. And if they would have helped some people, other people would have gotten angry and walked away from their homes if they couldn't get some consideration too. It was all going to be hard work, and it's just too hard.

Clearly something needs to be done (none / 0) (#11)
by Abdul Abulbul Amir on Fri Apr 29, 2011 at 11:59:32 AM EST

The IBD has a graph comparing the Reagan recovery to the Obama "recovery."

You're absolutely right (5.00 / 2) (#20)
by Yman on Fri Apr 29, 2011 at 02:15:43 PM EST

Maybe we should raises taxes and spending like Reagan did ...


Yes (none / 0) (#21)
by Abdul Abulbul Amir on Fri Apr 29, 2011 at 03:33:21 PM EST

He cut the marginal income tax rate to 28% and the tax revenue increased dramatically.


After Reagan the marginal rate cuts ... (5.00 / 3) (#23)
by Yman on Fri Apr 29, 2011 at 04:05:43 PM EST

... took effect in 1982, there was an immediate an precipitous drop in revenues (see page 27). After Reagan began raising taxes, closing tax loopholes and stimulating the economy with large amounts of government spending (through deficit spending), tax revenues increased.

Not surprising.


Reagan raised taxes (5.00 / 1) (#24)
by mm on Fri Apr 29, 2011 at 04:06:26 PM EST

BARTLETT: Reagan may have resisted calls for tax increases, but he ultimately supported them. In 1982 alone, he signed into law not one but two major tax increases. The Tax Equity and Fiscal Responsibility Act raised taxes by $37.5 billion per year, and the Highway Revenue Act of 1982 raised the gasoline tax by another $3.3 billion.
According to a recent Treasury Department study, TEFRA alone raised taxes by almost 1 percent of the gross domestic product, making it the largest peacetime tax increase in American history. An increase of similar magnitude today would raise more than $100 billion per year.

In 1983, Reagan signed legislation raising the Social Security tax rate. This is a tax increase that lives with us still, since it initiated automatic increases in the taxable wage base. As a consequence, those with moderately high earnings see their payroll taxes rise every single year.

The following year, Reagan signed another big tax increase in the Deficit Reduction Act of 1984. This raised taxes by $18 billion per year or 0.4 percent of GDP. A similar sized tax increase today would be about $44 billion.

The Consolidated Omnibus Budget Reconciliation Act of 1985 raised taxes yet again. Even the Tax Reform Act of 1986, which was designed to be revenue-neutral, contained a net tax increase in its first two years. And the Omnibus Budget Reconciliation Act of 1987 raised taxes still more.

The year 1988 appears to be the only year of the Reagan presidency, other than the first, in which taxes were not raised legislatively. Of course, previous tax increases remained in effect. According to a table in the 1990 budget, the net effect of all these tax increases was to raise taxes by $164 billion in 1992, or 2.6 percent of GDP. This is equivalent to almost $300 billion in today's economy.


His policies increased revenue so dramatically (none / 0) (#26)
by MO Blue on Fri Apr 29, 2011 at 04:07:28 PM EST

the deficit double during his administration. Prior to his tax increases in 1982 and again in 1984 unemployment rose to 11%.

..In 1981 at the start of the Reagan administration the deficit was about 2.5 percent of the national economy. By the end it was about 5 percent of the national economy. Interest payments just on that debt went from $69 billion in 1981 to $169 billion at the end of the Reagan administration.
...It's very clear that government revenues did not compensate for the cut in taxes. That's why we ended the 1980s with a huge deficit. That's why we started the '90s with a gigantic debt. LINK

A couple of points......... (5.00 / 2) (#27)
by NYShooter on Fri Apr 29, 2011 at 05:14:24 PM EST

Shades of Birtherism....."Lowering taxes increases revenues." No matter how many respected economists try to bury that "canard that will not die," true believers, their "truth deflectors" firmly in place, will keep on repeating the lie over and over again. As bush's aide said, "we make our own reality."

"Canard that will not die" #2......"We must reduce the deficit".....Increasing the deficit is Norquist's replacement for Viagra. Since the Right's goal is to destroy every program which helps the middle class the best way to do that is to dry up the funds, and what better way to do that than to reduce government income and then scream, "The Deficit, The Deficit!!!"


: Laffer Curve (5.00 / 1) (#29)
by Yman on Fri Apr 29, 2011 at 06:10:18 PM EST

I always thought it was named after the conservative economist Arthur Laffer. Turns out they chose that moniker after even all the Republican economists couldn't stop laughing at it.

If there's one thing that economists agree on, it's that these claims (cutting taxes increases revenues) are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues.

: Main points IMO (none / 0) (#28)
by MO Blue on Fri Apr 29, 2011 at 05:30:26 PM EST

Tax cuts reduce, not increase, revenue and reduced revenue increases the deficit.