New York Times Publishes Apology for Obama’s Failed Housing Policies

On the one hand, the dismal failure of the Administration’s cosmetic responses to the foreclosure mess is so evident that the New York Times is willing to acknowledge it, via a first page article titled, “Cautious Moves on Foreclosures Haunting Obama.” On the other, what the story offers is a whitewash, not an analysis.

The Times puts forward a long form apology for the Administration’s failure to face the housing crisis head on. It admittedly does start off as if it might be a hard-hitting piece:

After inheriting the worst economic downturn since the Great Depression, President Obama poured vast amounts of money into efforts to stabilize the financial system, rescue the auto industry and revive the economy.

But he tried to finesse the cleanup of the housing crash, rejecting unpopular proposals for a broad bailout of homeowners facing foreclosure in favor of a limited aid program — and a bet that a recovering economy would take care of the rest.

During his first two years in office, Mr. Obama and his advisers repeatedly affirmed this carefully calibrated strategy, leaving unspent hundreds of billions of dollars that Congress had allocated to buy mortgage loans, even as millions of people lost their homes and the economic recovery stalled somewhere between crisis and prosperity.

But even here, you can see the deck being stacked in Obama’s favor. He “inherited” the housing mess, so how much can we blame him. Bold measures were “unpopular”. Really? “Controversial” is a better word. Helping millions and boosting the housing market would have been more “popular” than letting stressed homeowners twist in the wind and the home values, and the economy, continue to stagnate.

The excuse for the inaction? The servicers were even more screwed up than the Administration thought, so even if they had pushed really hard, it’s unlikely things would have been different. That’s a convenient cover for what was really at work: a belief by Geithner, who was driving this train, that the banks needed to be coddled, which aligned with Obama’s disinclination to ruffle powerful industry incumbents.

Yes, it’s true the big servicers are incompetent. But that didn’t mean there weren’t alternatives. First, there are specialized servicers (known as “combat servicers”) who are set up to do “high touch” servicing. Distressed debt investors have been buying mortgages and using combat servicers (who typically have five times the staffing for the same number of loans as a traditional servicer) to restructure them (and no, I don’t mean Ocwen, it’s already too big and running too many standardized operations to do this job). There was and is a lot of capacity in combat servicing precisely because they believed the big servicers would have to offload some of their delinquent loans to them to see if they could be modified. Bank of America is required as part of its pending $8.5 billion settlement to offload all of its servicing of delinquent loans, which is proof that this was an option all along.

In addition, there are other approaches that would have taken pressure off the servicers’ lousy operations. One was developed by NACA, which was to have borrowers bring income documentation and provide their household expenses, and a NACA staffer would upload images of the documents to a server (no more “Honey, I lost your W-2”) and input the data into a spreadsheet so that someone at the servicer could see the borrower’s income, expenses, and other debt charges. Admittedly, NACA itself did not obtain all that many mortgage modifications. I’ve never gotten a good answer as to why; my sense is servicer lack of motivation was a big contributor, and NACA was also pushing for deep mods (which we and others have advocated) which also reportedly annoyed servicer personnel.

So the real issue here was one we’ve stressed all along: servicers were set up to foreclose, and they make money from foreclosing. They are not set up to do mods and don’t feel they are paid enough to do them. The Administration has finally decided to bribe them enough to get them to take interest, but this is still too little, too late. By contrast, the Administration had tons of leverage and could easily have made it clear they would make their lives miserable if they failed to do what it took to do to give more mods to viable borrowers. (The banks have a weak argument that they might have been sued by investors. The reality is investors have been remarkably unresponsive despite being on the wrong end of tons of abuses).

The biggest way they could have messes with the servicers was by threatening to enforce REMIC rules. REMICs, or real estate mortgage conduits, get pass through treatment (meaning the trust itself is not taxed, only the investor in it is when income is received). Among the requirements are that they be passive, which among other things meant all the mortgages had to be in the trust as of a specified date not long after trust closing. In addition, only performing loans can go in a REMIC. We’ve since learned that many if not most mortgages in the post 2004 securitizations weren’t conveyed to the trusts properly, and the servicers have taken to trying to convey defaulted loans into the trusts in order to foreclose. The penalties for prohibited acts under REMIC is a 100% tax on income. As we wrote in 2011:

Knowing of this background, in the blogger meeting with Treasury last August, when someone we will euphemistically call as senior official argued that the Treasury had little power over servicers, I objected, and said it depended on whether they construed of their power narrowly or broadly. I pointed out that a Pacer scrape on foreclosure filings would find thousands of violations of REMIC rules that were subject to punitive charges, and that that was an important leverage point to bring the industry to heel. (Yes, this is an example of using tax as a tool of policy, as opposed to merely enforcing the rules……that was by design). He sidestepped the reference to REMIC both in my initial question and follow up.

Steve Waldman, who was also at the session, was as skeptical of the exchange as I was. From a message last August:

Re REMICs: The reaction to your probing was very suspicious.

It’d have been one thing if he’d said they hadn’t looked into the issue. But that wasn’t how he responded. He started talking about how he’d had his staff “look for leverage”, against servicers I think, but found there was nothing there. In other words, he didn’t want to leave the issue open. He wanted to neutralize it.

One possibility is that the truth is face value, but I doubt it. After all, we’d just had staffers describe using the government’s leverage in creative ways to protect taxpayers or serve other public purposes as “extra legal”. Yet here was [the senior official] apparently on a fishing expedition for leverage, no doubt desperate to persuade servicers to facililitate mods to help homeowners. Yeah. Right.

If I’m not misunderstanding you, your core point is that the paperwork on many boomtown mortgages is invalid, and therefore various sorts of transactions, from foreclosures to bundling into REMICs, cannot be legally done, at least not without a lot of expensive research and recertification. In other words, your line of thinking would put a question mark beneath the value of a whole lot of bank assets. That would obviously not be in the national interest according to Treasury. So of course they’ve already looked onto the story and there’s nothing to it.

As Waldman indicates, there is a blindingly obvious reason why the IRS inquiry is a coverup. If the IRS were to find any of the questionable practices to be violations, they’d lead to widespread and large assessments against mortgage investors. That in turn would spawn the mother of all litigations by investors against the originators and trustees. That would blow up the mortgage industrial complex and put us back in a financial crisis. That is the last thing the officialdom wants to happen.

And this is EXACTLY why the Treasury had leverage. It had at least one nuclear weapon it could aim at recalcitrant servicers and tell them it was only out of their generosity that they weren’t throwing the book at them, and in return, they had better get off their duffs pronto and get religion about rescuing borrowers that could be salvaged. And if that cost them money, too bad.

And that brings us to the Big Lie in the piece: that the Administration was too conservative and didn’t want to be seen as helping undeserving borrowers. The reality was that all Treasury cared about was the banks. As Neil Barofsky points out:

And if you know the terrain, you can see how skewed the reporting is. HAMP, the abortion of a program that had people who might have been able to keep their homes, admittedly under strain, told to default by servicers and often losing their homes as a result, isn’t mentioned by name. There is an interactive graphic, but the omission of the word “HAMP” looks an awful lot like a deliberate effort to steer clear of the issue most often discussed in connection with HAMP: not how few were helped, but how many were affirmatively harmed.

Nor is the heinous “get out of liability for almost free” card known as the mortgage settlement. How can you talk about Obama’s housing policy and dodge the two biggest programs undertaken on his watch? Instead, the article depicts a HOLC-style massive mortgage program and bankruptcy cramdowns as the only alternatives. And it does present the waving off of cramwdowns a mistake, but again offers excuses:

But he also repeatedly pressed the pause button. When proponents sought to add a cramdown to the Emergency Economic Stabilization Act in September 2008, Mr. Obama, who had flown back to Washington from the campaign trail, persuaded them to postpone the “partisan” effort as an example to Republicans, who said the measure would violate existing contracts.

This is stenography masquerading as reporting. First, bankruptcy is a court of equity, not law. Contracts ARE put aside in bankruptcy; that’s the whole purpose of the exercise. Second, as for borrowers who had not declared bankruptcy, the servicers are specifically obligated to service the loans in the best interests of the certificateholders. A real threat of bankruptcy by specific borrowers would change the servicer’s obligations. And I strongly suspect that the real issue was bankruptcy cramdowns would lead more borrowers to declare bankruptcy, which would lead to more second mortgages being wiped out…which would lead to more questions about the solvency of the banks, particularly Bank of America.

What’s appalling about this story isn’t just the spinelessness and dishonesty of the Administration. It’s that it’s matched by many of the reporters on this beat.

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  1. Conscience of a Conservative

    The article shows it’s bias in the first sentence.. “After inheriting the worst economic downturn since the Great Depression”

    1. Srihari Yamanoor

      I like how you create the crisis, then lose power, come back and spew venom at the guy who has to clean up after you. Nice try, and oh, the NYT is a real newspaper. Maybe, they published an apology, but you re-published it. Some hard work that. Please stick to writing about finance…

      1. Ray Phenicie

        “I like how you create the crisis, then lose power, come back and spew venom at the guy who has to clean up after you.”
        This is the first of several incoherent statements-who is the third person ‘you?’ Until that is clear, I’ll have to ignore this first line.
        “Nice try, and oh, the NYT is a real newspaper. Maybe, they published an apology, but you re-published it.”
        Not a real hard hit, we’re all clear, those of us who hang out here at NC on a regular basis that the NYT is challenged in the facts department in a lot of the reporting they do, but in order to drive out bad information one does have to raise up issue by pointing out-point for point-where the bad reporter got it wrong. And yes, that means putting up the whole stinking mess up all over the place. When puppy messes on the floor, One does have to rub the puppy’s nose in the mess it makes to get the point across.
        “Some hard work that.”
        The truth is that pointing out how weak and flawed the article was is very hard work-try it yourself sometime.

        “Please stick to writing about finance…” This is about finance so she is following your advice.

        Anything else of a constructive nature you have to contribute?

  2. Daily Kos reader

    NY Times: “Cautious Moves on Foreclosures Haunting Obama”

    See, the man is *haunted* by the failed housing policies!

    Deep down, he’s really a sensitive, caring man, a poet in fact.

    “He hates all this. He hates it! But the man’s a…He reads poetry out loud, all right.

    “…The heads. You’re looking at the heads. I, uh – sometimes he goes too far, you know – he’s the first one to admit it!”

    (photojournalist in “Apocalypse Now”, apologizing for all the severed heads adorning Kurtz’s headquarters)

    1. Daily Kos reader

      First I’ll use the Kossack app on my iPhone to read Daily Kos’s analysis of this issue.

      Then I’ll listen to Planet Money to get Adam Davidson’s fair and balanced opinion.

      And like this, having been exposed to a wide range of opinion, I’ll make up my own mind.

  3. Middle Seaman

    This indeed was a Great Depression like financial crisis. It is difficult for most reporters to understand the financial condition post 2008. They don’t seem to have the intellectual time and flexibility to understand the complexity. Therefore, it seems easier to give in to biases that were formed through the years. It’s easy, for instance, to listen to Geithner’s explanation rather than ask “does it make sense?”

    1. Carla

      I would suggest that reporters are not PAID to understand complexity, let alone analyze it for readers. They are paid to churn out whatever message their bosses order up for the day, no more, no less.

      1. Carol Sterritt

        You nailed it. And these days, the people who graduate at the top of their clss go on to be spokespeople for Big Corporations where they can make two or three times what a reporter makes.

        The bigger problem, however, is that the bosses at the newspapers owe their bosses, the advertisers. And since those advertisers tend to be (especially in New York city) the Big Banks and Big Financial Firms, it becomes obvious that the NYT would probably be the least likely to deliver the full story.

        A sentence in the middle of this article leaped out at me – that the reporters rather take Geithner at his word, and Geither has been totally in synch with his friends at AiG and Goldman Sachs in terms of helping think up the Bush/Obama Doctrine of Too Big To Fail.

  4. ambrit

    How about we try a thought experiment; substitute sports metaphors for all financial allusions in the NYT piece. Then it all makes sense.

    1. Susan the other

      faking a pass, going long, undue roughness, no harm no foul…home run, grand slam…5 fouls and you are out, throw the game… ref bribing scandal, understaffed goalie? Too many concussions. Oooo, the crowd is getting ugly…

  5. fresno dan

    “The penalties for prohibited acts under REMIC is a 100% tax on income.”

    The US government is of the banks, for the banks, by the banks…

  6. Art Vandeley

    During my 2+ years working for a distressed debt investor, I worked with NACA on several occasions. The typical borrower profile was 200%+ LTV, 12+ months delinquent on their 2006-2007 cash-out NINJA subprime loan, and “Check-Writing Jesus” was going to pay off their mortgage any day.

    NACA would always ask for a 50% principal reduction with a 1% rate for 30 years because, “you’re making tons off this loan.” When I’d ask if they’d loan their own money to this borrower, each time it was, “No way, are you crazy! They’d never pay me back.”

    Homeowners typically dilly-dallied for an extra 3-4 months, thinking/hoping/praying NACA would pull off some miracle, even though NACA had nothing to offer besides aggregating their financials. They were more of a nuisance because they kept homeowners fixated on mods at all costs even if the homeowner couldn’t afford to own a home at that time.

    If the borrower could afford the monthly debt service, we’d find a local credit union, community bank, or FHA to do the principal reduction refi – creating a loan that would get repaid. If not, we’d settle their property taxes, HOA, junior liens, give them Cash For Keys, and record a Deed In Lieu or Short Sale.

    1. citalopram

      NACA was absolutely useless for us. We ended up walking away and negotiating ourselves.

      NACA is a very good idea, but very poorly executed.

    1. ifthethunderdontgetya™³²®©

      Arthur Silber, May 2008:

      “The Wall Street plan for the Obama-bubble presidency is that of the cleanup crew for the housing bubble: sweep all the corruption and losses, would-be indictments, perp walks and prosecutions under the rug and get on with an unprecedented taxpayer bailout of Wall Street.”

    2. TK421

      But there hasn’t been a crisis on Wall Street since then. Right? Look over there–Mitt Romney has an elevator in his house!

  7. Robert Asher

    Perhaps if IG TARP had been given freedom (and more resources) to go after fraudulent mortgage companies their behaviour would have changed. But as Barofsky notes in his book those mortage servicing companies are subsidiaries of the big Wall Street Banks. THE US has no law and order anymore; just the feudal rule of the banks.

  8. km4

    Niall Ferguson: Obama’s Gotta Go
    Aug 19, 2012 1:00 AM EDT

    In his inaugural address, Obama promised “not only to create new jobs, but to lay a new foundation for growth.” He promised to “build the roads and bridges, the electric grids, and digital lines that feed our commerce and bind us together.” He promised to “restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its cost.” And he promised to “transform our schools and colleges and universities to meet the demands of a new age.” Unfortunately the president’s scorecard on every single one of those bold pledges is pitiful.

    1. MontanaMaven

      By line on Ferguson’s piece is “Why does Paul Ryan scare the president so much? Because Obama has broken his promises, and it’s clear that the GOP ticket’s path to prosperity is our only hope.”

      Austerity from Obama or Romney is not “our only hope”. Occupy still breathes. The action is not in elections but locally. Don’t be put off my the New Agey music.

      Screw hope. So Occupy Vacant Lots and plant veggies not corn; organize more workers co-ops to produce just what we need; explore local currencies in a transition to a gift economy or non exchange based economy; raise people’s awareness of alternatives; and dance together in the streets.
      Suggested reading: Barbara Ehrenreich’s “Dancing in the Streets”. And watch Naomi Klein and Avi Lewis’ “The Take” about Argentines taking over a factory.

      1. Susan the other

        Gift economy? More please. I pondered some alternatives. The take-it-and-leave-it economy, based on community sharing and recycling. The library-loan economy, where everything you need is available to be checked out and returned for a small yearly tax. But these separate out into very local arrangements. No broad solutions. Fun to think about.

        1. MontanaMaven

          David Graeber writes about gift economies like the ones practiced by Northwestern indian tribes in his great book “Debt: The First 5000 Years.” In these tribes, chiefs would try to outdo each other in giving things away. The Canadian government outlawed these “potlatch” celebrations. Obviously, the idea of redistributing things once a year while dancing and singing was way to subversive. They lifted the ban in 1951. Graeber also wrote a piece about the originator of modern “gift economies”, the French anthropologist Marcel Mauss in “Give It Away”.

          But just when I was feeling good about this, I read an awful selfish entitled article in the Missoula Independent. Seems like this young writer has turned the idea of a “gift economy” into a “grift economy” which we already have. But what can you expect when we have grifters at the very top of government, finance, and business? The fish stinks from the head.

          Here’s a highlight from her honest but creepy journal:
          ” In a gift economy, we work for the sake of work and we gain status the more we’re able to give away. I use Facebook to take the gift economy out for a spin. My status updates become a list of demands. I try to couch them in charming rhetoric, but I’m just a beggar: I need a yoga mat. I need a bike. I need a ride to and from the drop-off point to go tubing. I need a ride to the movies to see a terrible movie so I can write a review for the paper.”

          Another commenter recommended to me Barbara Ehrenreich’s “Dancing in the Streets” that also chronicles festivals where goods are given and not exchanged.

          1. Doug Terpstra

            Chris Columbus, the intrepid emissary-explorer for Spain who “discovered” America, was also astonished by the “gift-economy” cultures. From “A People’s History of the United States” by Howard Zinn, Columbus sounds like violent version of your freeloader:

            “The Indians, Columbus reported, ‘are so naive and so free with their possessions that no one who has not witnessed them would believe it. When you ask them for something they have, thehy never say no. To the contrary, the offer to share with anyone….'”

            “‘They willingly traded everything they owned…. They were well-built, with good bodies and handsome features…. They do not bear arms, and do not know them…. They would make fine servants…. With fifty men we could subjugate them all and make them do whatever we want.'”

            “‘…I took some of the natives by force in order that they might learn and might give me information of whatever [gold] there is in these parts.'”

            On his second voyage from Spain he came with 17 ships and 1200 soldiers, returning to Spain with 500 slaves, 40% of which died on route.

    2. They didn't leave me a choice

      As bad as obama is, at least he’s not Niall Ferguson. Despite having read this site for a while and following US politics for a while, I still have yet to see a more despicable excuse of a “human” being. The imperialist apologist is about as low as a “human” can fall to, his intellectual dishonesty and sheer vile, contemptible cheerleading of actions of western empires since the renaissance are almost beyond belief. The way he looks down upon all others but the GLORIOUS WESTERN CULTURE is just godawful. Honestly, I don’t think the english language contains expressions horrible enough to be sufficient to describe this creature.

      1. Cap'n Magic

        I listened to his recent Reith Lecture series on BBC World Service. When he made the statement in responding to Taleb’s “Black Swan” events that “the opposite of fragile is anti-fragile”, coupled with his insistence that one should join the Tea Party vs Ocupy Wall street told me everything I needed to know about this Tory Toady. At least fellow Tory Andrew Sullivan ripped him to shreds on his blog (damning with faint praise in a matter of speaking) for wanting an American Empire. To think that Harvard undergrads have to listen to this man pontificate makes me even more resolute in stating that anyone who has a Ph.D who speaks from outside of their thesis is not fit to be listened to-but to be continuously mocked, hissed and spat upon for their own hubris. After all, it was Ph. D’s whose actions in words and deeds caused the second depression (Greenspan, Gramm, Summers, etc.)

        Lets not also forget, that during WW II, it was the learned who conducted the most heinous experiments directly on humans.

  9. Susan the other

    It is beyond disappointing, even beyond disgusting, that the great populist poseur, Obama, has used every trick to feed money to the banks. We are not better for it, we are worse. We are now in the same boat as Spain and Greece, both receiving grants of debt to pay off debt. This is almost a pyramid scheme for the banks. Or as Varoufakis calls it, ponzi austerity. I couldn’t imagine a worse mess than this.

  10. chris

    not that it matters, since voting is basically pointless but if you’re gonna vote, vote A.B.O.O.R: Anyone but Obama or Romney

      1. Daily Kos reader

        Yeah, who would be the lesser evil: Fuhrer Heydrich or Fuhrer Himmler?

        At Daily Kos we have a simple formula for determining the answer to this question. It depends which of them runs as the Republican and which one runs as the Democrat. For example, if Heydrich runs as the Republican, and Himmler runs as the Democrat, then we Kossacks believe Himmler would be the lesser evil. On the other hand, if Himmler runs as the Republican and Heydrich runs as the Democrat, then we Kossacks believe Heydrich would be the lesser evil.

        1. Mark P.

          Pretty much the size of it.

          I like your comments, Daily Kos Reader.

          (Though for formality’s sake, you have to be docked a perfunctory point or two for comparisons to Nazis, which are always over-facile. Well, till the real thing shows up, anyway.)

    1. enouf

      heh, you seem to have already accrued three who entirely missed your point.

      … heh, i don’t know which factors are more to blame as a result; a) Academia b) Brainwashing c) Propaganda d) False-Dichotomy Religiousity e) Fear f) Cognitive Dissonance ..or perhaps some sort of mix of all of the above.


  11. Stroebs


    Agree with most of your point on the potential threat posed by “cram downs” bankruptcies (in which a secured debt is reduced to the value of the underlying collateral).

    Please note that the cramdown of secured debt in bankruptcy is predominantly a matter of statutory law (the Bankruptcy Code), not equity. As it relates to homes, the debtor’s ability to cram down mortgages to the value of the underlying collateral in “consumer” chapter 7 and chapter 13 bankruptcies is extremely limited.

    Although Bankruptcy Courts have equitable powers, they are constrained to orders that will carry out (not rewrite) the provisions of the Bankruptcy Code.

    The point being that a bankruptcy court cannot simply invoke “equity” to write down mortgages or reject contracts, particularly where the statute does not permit it.

    1. Yves Smith Post author

      You are missing my point.

      The contracts the Republicans were complaining about “violating” were the pooling and servicing agreements. That’s too bad. Happens in Ch. 13s now. And the more accurate interpretation of the servicer’s obligations under the PSA if a cramdown were passed is they’d be breaching their obligations if a borrower presented evidence that he could and would file for BK if they didn’t offer a mod. But the reality is the servicers violate their contracts ALL THE TIME, yet we don’t hear sanctimonious Congresscritters saying much about that.

      1. steelhead23

        Yves, Your response begs this question – why the hell have the bondholders not revolted en masse to this self-serving behavior of the servicers? It goes without saying that the trusts would lose less money if the servicers offered not just payment and interest mods, but principal mods as well. And here’s the kicker – the servicers are also the originators of both mortgages and HELOCs. So, clearly, the servicers have a vested interest in keeping bad loans on the books. MBS bondholders should be banging pots and pans (and hiring junk-yard-dog attorneys by the kennel-load). I don’t get it.

        BTW – thanks for referencing Steve Randy Waldman. Following your reference, I took a few minutes to read his latest posting at and am duly impressed. Made my mind work like I was back in college. Bright guy – very bright guy.

        1. Yves Smith Post author

          OK, I have gone over this before, but it’s so counterintuitive it bears repeating:

          1. Most investors are not investors but fund managers, ie Blackrock, Pimco. Not their money. Oh, and I’m told they have complicated rationalizations as to why their fiduciary duties do not include litigating when contracts are broken

          2. Free rider problems. Any one investor in any deal does not own many bonds

          3. Fund managers don’t want to make their good friends the bank mad

          4. For anything that requires getting the servicer to Do Something under the PSA, you need 25% of the bondholders in that deal to go sue the complicit trustee. That threshhold is in the PSA. You have coordination problems (list of owners is not public) + often 25% don’t want to act (per reasons 1 and 3).

          1. enouf

            Would this be a fairly correct summation?;

            ‘Obscurity and obfuscation through “slice and dice” machinations?’


  12. Jill

    I heard the most interesting analysis of Gu Kailai’s trial on BBC World this morning. It was pointed out that any questions addressing a factual understanding of what happened to Mr. Heywood were completely left out of the trial. The analyst came straight out and said her trial was about dealing with a political problem created by a murder, not the murder itself.

    This describes the most newz sites on everything to do with Obama and Romney. US powers clearly think Obama is their better choice (althought Romney would not be a disappointment!). Facts must be swept aside and replaced by “solving” the political problem. The problem is Obama was and is a lackey of the finacial industries. This truth must be erased from people’s minds.

    Here Yves, is asking questions which go to facts. She is pointing out aspects of what happened which directly contradict this vapid and disengenous article. Therefore it is not impossible to go over the facts and come to a conclusion about them. Yet, these facts are not addressed in the article at all.

    The entire campaign coverage seems bent towards “solving” a political problem, not helping peope to understand what is really going on.

    (Let’s not forget all those phone calls Obama made for TARP, his stripping out of real penalties even before he took office. Then hiring Geithner? Yep, he only wanted to best for the people!)

    It would be great if we had campaign coverage that was about the reality we face, not about “solving political problems” of the elites. There’s a real difference in what that type of reporting looks like and an equally important difference in the effect it would have on an informed populace in a voting both and as a organized force of resistance to injustice.

    1. MontanaMaven

      “This describes the most newz sites on everything to do with Obama and Romney. US powers clearly think Obama is their better choice (althought Romney would not be a disappointment!). Facts must be swept aside and replaced by “solving” the political problem. The problem is Obama was and is a lackey of the finacial industries. This truth must be erased from people’s minds.”

      Very insightful. They are reporting the message and not the facts. They are dealing with the political problem not what really went on. I remember hearing a famous reporter breathlessly reporting on an Obama press conference and how masterful he was in spinning and not answering the questions. It was creepy in being so blatantly telling us that it’s all propaganda. Nothing to see here, folks (term that indicates lying).

      1. Klassy!

        They had a photo of an unfinished housing development in Arizona. If they were doing their job they would be sending out reporters all over the US covering the devastation to actual neighborhoods that these failing housing policies have wrought– not just for a once a year article, either.
        But, the audience that they write for lives in those pockets of prosperity that like to believe that their prosperity is due to smart development policies, fabulous human capital, and entrepreneurship when really what it is due to is corporate welfare (think DC and its contractor economy or NYC and its guarantees for TBTF banks).

  13. Klassy!

    Although my mental health would be better served from staying away from the reader comments at the NYT occasionally there is a comment that gets right to the heart of the matter.
    These may be identified by the lack of the word “obstructionists” in the text.
    Here is one such comment:
    Why is this article written from the perspective of how it affects Obama? It reads like an Obama newsletter to his followers about what’s good and bad for him instead of what’s news to the general public. The American people are being affected here not just Obama.

    1. Jill

      Klassy! I love that comment! I’ve noticed that all major issues are discussed, not in how they actually effect the people effected by them but by how something impacts the campaign of Obamney.

      Congratulation on your ability to read through so much crap to get to one good comment!

      1. Klassy!

        Jill, I see you wrote something similar above–The entire campaign coverage seems bent towards “solving” a political problem, not helping peope to understand what is really going on..

        I don’t read through all the comments– usually sort by highest rated and then let the disappointment begin! The comments on the Ta-Nehisi (sic?) Coates op-ed yesterday were –well, actually none really had anything to do with the column (a very mild denounciation of Obama’s due process free assasination policy). Not disappointing– just predictably depressing. Like I said, I need to stop reading them.

        1. Klassy!

          Of course, the NYT would not like to use actual facts (as Yves does). They would say this crosses the line into “advocacy” and they are “journalists”.

  14. Thomas

    Need only a house “Lemon Law”. Bank lied, appraiser lied, rating agency lied is clear. Take the house give me a refund.

    1. Eric377

      Return to reality, please. What lying did banks do in connection with most mortgages? You want $400,000 and want to pay a low rate for 4 years? They had a product for that. That you feel trapped now in year 6 doesn’t mean you were lied to. Appraisers? Good lord, there were real comps out there at the price level you paid…your purchase was a valid comp for the next. You can look back and say prices were crazy, but if people were paying them, then those were the actual market prices. As for rating agency, they were rating the security created from your loan, not your loan. Lemon laws for autos do not relate to pricing. The parallel process for house purchases is disclosure and home inspection. A home inspector might tell you that the roof has a problem and the foundation leaks and these may cost you $15,000 to repair within 12 months, but they aren’t going to say ‘and $400,000 is way too much for this house’.

      1. Ensendada Slim

        Eric377: “What lying did banks do in connection with most mortgages?”

        Ha ha, very funny.

        Here’s a few more banker jokes for you.

        Q: What’s brown and looks really good on a banker?
        A: A Doberman.

        Q: What do you call 5000 dead bankers at the bottom of the ocean?
        A: A good start!

        Q: What’s the difference between a dead skunk in the road and a dead banker in the road?
        A: There are skid marks in front of the skunk.

        Q: Why won’t sharks attack bankers?
        A: Professional courtesy.

        Q: What do you have when a banker is buried up to his neck in sand?
        A: Not enough sand.

        Q: How do you get a banker out of a tree?
        A: Cut the rope.

        Q: Do you know how to save a drowning banker?
        A: Take your foot off his head.

        Q: What’s the difference between a banker and a bucket of manure?
        A: The bucket.

        Q: What is the definition of a shame (as in “that’s a shame”)?
        A: When a busload of bankers goes off a cliff.

        Q: What is the definition of a “crying shame”?
        A: There was an empty seat.

        Q: Where can you find a good banker?
        A: In the cemetery

      2. steelhead23

        You deserve more than recycled lawyer jokes. Look, you have a point – everyone wanted ON the asset appreciation bus. High school dropouts were buying and flipping houses and making a fortune (or at least they said they were, while trying to sell us the secret). So, in a way, many of us are a tad guilty of that old bugaboo – trying to get something for nothing.

        And everyone lied. The banksters lied to investors on the quality of the bonds they were hawking. The banksters lied to regulators about the quality of their assets. The Fed lied that you can keep interest rates low without causing a credit mania. Yes, even appraisers lied as they threw out the lowest priced comps when qualifying us for loans. But you know what? In our highly specialized technological society, we proles trust in the veracity of trained professionals – and you trained professionals feasted on that faith. Shame on you.

  15. Paul Handover

    As an Englishman in his sixties living in the USA (Arizona)since 2010, I acknowledge that much of American culture will be foreign to me for the rest of my days – not a criticism by the way.

    But I find that the comments only flirt with what strikes me as the core of Yves’ excellent article. That is that the USA seems utterly consumed by money, politics and power. As Fresno Dan wrote, “The US government is of the banks, for the banks, by the banks…”.

    But perhaps Fresno Dan should have written, “World governments are of the banks, for the banks, by the banks!”

    That to me is the really scary aspect of the era we are in. Or more better described as the end of the era that we are in. Until there is a wide-spread movement towards truth and integrity amongst politicians and leaders, and the press, across the ‘free’ world then the future for our children and grandchildren looks pretty bleak.

    With the explosion in the ability for good, common folk to be able to express their feelings across the digital world and my instinct that those same common folk are desperately worried about so many aspects of the way the world is heading, the chasm between those good folk and our leaders is frighteningly huge.

    The only comfort to me is that this divide is unsustainable and that a new social order can’t be far away – I hope!

    (Sorry didn’t mean to rabbit on as much as I did!)

    1. bhikshuni

      “my instinct that those same common folk are desperately worried about so many aspects of the way the world is heading, the chasm between those good folk and our leaders is frighteningly huge.”

      I’m afraid your instincts are probably mistaken. I suspect our “common folk” are far more interested in Snookie and alligator wrestling than economic, financial, or other issue of policy-making or governance, and this makes them de-facto enablers of our banking misconduct and corrupt politicians and they too know this.

  16. Hugh

    Yves has this exactly right. This was always about the banks and masking their underlying insolvency long enough for them to cheat, steal, and gamble their way back to some semblance of solvency.

    Programs like HAMP were meant to string along distressed homeowners, and the public, and to string out foreclosures so that the resulting downward pressure on housing prices, and hence bank balance sheets, while not insignificant, was minimized.

    I for one think that we will eventually need some kind of HOLC-like entity to help homeowners, re-establish a sound basis to home prices and work through the whole issue of clouded titles. This can be done via cramdowns and new long term low interest fixed rate mortgages, rent and rent to own programs, credits to those who paid off inflated mortgages, and quasi judicial courts to re-establish chain of title and validate the results.

    I also wanted to say I agree with Conscience of a Conservative’s initial comment to this thread, although possibly not in the way he/she intended. I have been for some time stressed the importance of understanding what is happening to us in terms of kleptocracy, since in my view kleptocracy is the only theory that explains how we got in the current mess and why we remain and are likely to remain in it. The building of kleptocracy has been going on for 40 years now. It has been expanded and promoted by Democratic Presidents and Republican Presidents, by Democratic Congresses, by Republican Congresses, and by split Congresses. Obama is just the latest in a succession of kleptocracy-enabling Chief Executives. He, like every other member of our political classes, doesn’t deserve the presumption that he is acting in good faith or a grant of our good will. Yes, he inherited the present crisis, but that is a singularly empty statement. We could say the same of John McCain if he had been elected President instead. The point is just because Obama “inherited” the current mess doesn’t mean he isn’t responsible for it. Obama is not some frustrated reformer. He is just the current public face our elites and kleptocratic rich have chosen to give to the looting. How in any sense does that mitigate his culpability or reduce his responsibility?

  17. Kokuanani

    Yves, word missing:

    ***The servicers were even screwed up than the Administration thought,***

    I think you need a “more” before “screwed up”.

  18. Eric377

    The amount of energy going into this discussion amazes me. Default delevers borrowers who are stressed. It delevers borrowers that are not stressed but have lost any financial interest in continue to pay. You can complain about the inadequacy of HARP, etc., but since the President did nothing to take away any borrower’s strongest option – the freedom to default – on the whole, the full policy options were as effective as the aggregation of borrowers needed them to be. There did not need to be programs to create options between paying or defaulting: those two provide good enough options already.

    1. F. Beard

      There did not need to be programs to create options between paying or defaulting: those two provide good enough options already. Eric377

      Wrong. Your assumption is that our money system is ethical. It isn’t. Instead it is a government enforced/backed counterfeiting cartel that simultaneously drives borrowers into serviceable debt and cheats non-debtors with negative real interest rates. It also confuses and divides the population and recurrently wrecks the economy.

      1. Eric377

        Well, I’ve taken out 3 mortgages in my life. Each time the lender’s check for the agreed amount was accepted at closing and each time I paid as I had agreed with the lender. And each time I finished paying as agreed, the mortgage lien was released. If you believe the whole business to be sordid, fine, but if ethics involve having your counterparty do what they agreed to do if you do what you agreed, then I have no ethical complaints about my lenders at all. 90% of the complaints on this site come down to buyers deciding to pay a purchase price that they now regret and have nothing to do with the source of funds that they made that now regretted purchase with.

        1. F. Beard

          then I have no ethical complaints about my lenders at all. Eric377

          Meanwhile both you and the bank have stolen purchasing power from those who can’t or won’t borrow.

          Yes, you may have had no other choice than to be a victim yourself and that is my point. The system is crooked. Hence your pious “sanctity of contract” argument is bogus. The banks lend what isn’t theirs to lend – your’s and other people’s stolen purchasing power.

        2. PL_2

          Hmm. So the borrower and the lender both ‘bet’ wrong that housing prices were at least stable, but only the lender is bailed out.

          It not only ruined the ruined borrower, but the whole economy for the middle class, indefinitely.

  19. dirtbagger

    The problem with this article, like so many others is it cast the homebuyer as the victim. Get rich in Real Estate was the rage in the early 2000’s. Seminars, courses, reality series on TV. The housing crises was causes just as much by greedy people collectively making poor decisions as it was by banks promoting and capitalizing on a business opportunity.

    There was always an inherent problems with HAMP or other mortgage reduction programs. These programs do not digest well for the vast majority of taxpayers who did not indulge in the housing bubble kool-aid. Those of us who rent or purchased homes within our budgets, and did leverage out paper equity profits are not particularly sympathetic toward those who did otherwise.

    What rankles me most about the Obama administration was their decision (rather their continuation of the status quo) to bail the banks and throw the home buyers to the wolves. One can argue that both the banks and homeowners should have both received assistance or the opposite that both parties should have been thrown under the bus and allowed capitlism to function.

    When Obama, Geithner, Benanke, Summers, Holder, et al, advocated unequal outcomes for lenders versus debtors, they relinquished any illusion of being just and fair representatives for all citizens.

    1. Carol Sterritt

      Dirtbagger, what you say makes sense, if you ignore the elephant in the room. Yes, some of the homeowners should never have gotten the loans they got. And some of the homeowners don’t understand money and how to handle it.

      But what you are overlooking is that the grave financial crisis that is afflicting this nation was a setup, and that those who pulled every single string they could pull over three decdes, to make the setup happen are the winners. Despite all the energy spent in discussions about the economy, and feuds and fights about who is at fault, your comments ignore the people at the top.

      These were the very wealthy people who went out and purchased Congress and the politicians who run for the Oval Office. Once these politicians were bought and paid for, Glass Steagall went the way of the dinosaur, and our economy imploded a mere nine years later. (Remember: If you voted for Obama or McCain, you still would be responsible for voting in a President who favored the Too Big To Fail Doctrine – which is a nonsensical policy.) And after all is said and done, there are still some half a quadrillin dollars worth of bad gambles held by Big Financial Firms, so at any time the system can come toppling down again. There were not enough people on this planet– times fifty– to create the type of financial disturbance that became the Meltdown of 2008. The meltdown happened because of the exotic bets that were made – not the foolish buyers that bought houses between 2000 and 2006.

      You can pat yourself on the back all you want for living inside your budget, and that is no small thing, and good for you, but it doesn’t excuse the fact that right now the One Percent rule the rest of us, and the amount of trillions of dollars of Bailouts that Bernanke/Geithner created digitally to help out people inside the inner financial realm will be amounts of money that our grandchildren and great grand children will be required to pay off. And of course, the politicians are now getting together to swipe the Social Security Fund, which currently ahs a 2.1 trillion dollar surplus.

      1. dirtbagger

        Them that’s got shall get
        Them that’s not shall lose
        So the Bible said and it still is news

        Billie Holiday / Arthur Herzog Jr.

        When has this really been different among the many civilizations over the last few milleniums?
        The top has always had the advantage, it is just a question of how far the pendulum has swung in the favor of the 1%.

        I completely agree with your assertion that wealthy elite have been pursuing a political agenda over at least 30 years to enhance themselves at the expense of the 99%. I also agree that the balance has gone completely out of whack over the last decade. I just get very irritated at those who write columns and imply there was some golden era when politicians looked out for their constituents best interests and the main focus of bankers was protecting depositors assets.

        Yes,in theory, during the housing bubble the bankers were the adults in the room and one would have hoped they would make responsible decisions. In reality, their job is to make as much money as possible for the financial institution and in turn enriched themselves. This just seems to be the human condition and the outcomes are unlikely to change without enforcement of regulations and severe repercussions for misdeeds.

        The Obama administration’s record for prosecution of financial crimes is an absolute disgrace. Holder must really believe in the concept that justice is blind, because he is about the only one that cannot see any fraud or financial misconduct.

  20. Ray Phenicie

    This critique of the NYT’s whitewashing again for the Oval Office on the epidemic of control fraud worked on us by the mortgage industry is a much needed thing. Gresham’s law is at work only with information.

    From Wikipedia:
    Gresham’s law is an economic principle that states: “When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”[1] It is commonly stated as: “Bad money drives out good”, but is more accurately stated: “Bad money drives out good if their exchange rate is set by law.”

    The same principle works on information, public policy decisions and politics. In short, bad information drives out good. Cheryl Boudreau has written a paper that shows that bad information on a subject drives out the good and folks rely on the bad information to make decisions even when they harm themselves by doing so.
    From the abstract for her paper entitled Gresham’s Law of Political Communication: How Citizens Respond to Conflicting Information:

    Although citizens are often exposed to conflicting communications from political elites, few studies examine the effects of conflicting information on the quality of citizens’ decisions. Thus, I conduct experiments in which subjects are exposed to conflicting information before making decisions that affect their future welfare. The results suggest that a version of Gresham’s Law operates in the context of political communication. When a credible source of information suggests the welfare-improving choice and a less credible source simultaneously suggests a choice that will make subjects worse off, subjects make worse decisions than when only the credible source is available. This occurs because subjects base their decisions upon the less credible source or forego participation. This occurs mostly among unsophisticated subjects, who are more easily led astray. These findings reveal important limits to the effectiveness of credible information sources and suggest how political campaigns might strategically use conflicting information to their benefit.

  21. EverythingsJake

    It seems to me the article is really a whitewash of the DC/NY consensus approach to the crisis. That Obama was/is President (and seems to have been chosen because he was in fact the best PR guy for the con job) is more coincidental than not. This article could and would have been written as easily about President McCain or President (H.) Clinton.

    None of which is to say that Obama, Summers and Geithner aren’t in and of themselves particularly egregious members of the neoliberal species. And even if on technicality, Obama isn’t an outright liar, he is certainly among the more deceitful and duplicitous individuals to occupy the oval. I’ve began to think of him as Edward Bernays’ Frankenstein.

    1. NotTimothyGeithner

      I’ve come to the conclusion the problem isn’t that D.C. is run by a single corporate party or pathological liars but that laziness is endemic throughout the modern political elite. The search for “a consensus” is a sign of this. They aren’t trying to create consenus but are looking for something which won’t cause trouble because trouble means they have to do the hard work of selling policy.

      Its easy to sell Obama’s public persona versus Mitt Romney. Its easy to warehouse poor people who can’t afford lawyers, but its fairly difficult to prosecute fraud because it means paperwork, reading something other than fluff history of Doris Kearns Goodwin, and long nights when people can’t visit their mistress or go to a cocktail party. Lets not forget the importance of sexiness. Organizing people to stand in front of Wal-Marts with voter reg forms and walking miles through Detroit like areas making sure people know the location of their polling place isn’t sexy. Its grueling and way less fun than coming up with a witty ad campaign.

      Everything this administration has done has been to avoid conflict and grueling work unless it had a sexy appeal such as picking out the photos of the guys to be targeted by predator drones. Obama has time for that, but he doesn’t have time to make the case for efforts to combat global warming largely because George Will might write a mean column or some dumbass reporter might ask him a stupid question.

  22. PL_2

    I don’t know if it’s ever been said quite right.

    One thing HAMP did was WRECK your credit the day the trial program started, making any other alternative, even including getting another job, impossible.

    It was set up to discover and allow rejection of anyone with equity, and RUIN their credit and any other chance, effectively luring them by hope for some relief, and trapping them.

    Equity stripping, I do believe.

    No homeowner crashed the housing market. If the housing market were not crashed there would be no foreclosures — you could just sell your house. Therefore no homeowner was guilty in being foreclosed, only the people who crashed the housing market were guilty. Yet the deck was stacked to protect them.

    1. Carol Sterritt

      Very nicely stated. I spent time over the last two years, trying to help people out through using HAMP. I heard the same story again and again – the banks required various bits of paper, records, financial statements, etc. Homeowners assembled those and sent them in. They were told all was okay, and that in a week or two they’d get a meeting with someone to handle everything. That two weeks would come and go, and the homeowner would call the bank up. They wouldn’t, of course, get the same person they had talked to before. They got a new voice on the phone. And that person said, “We never received any of your paperwork, none at all, and now the clock has been ticking and we will be foreclosing your house.”

      That is when I’d move in, and usually by doing a few tricks, including making a lot of noise over at our local Congressional Representative’s office, so pressure would mount. Then miraculously, the bank would discover the papers that “had never been sent.” Now both families I have helped wonder if any of it was even worth it. They’ re still seriously underwater, while friends who simply walked away from their homes are waiting out another two years, and then they can re-enter the housing market.

      And what was this all about? The People at the Top are slimeballs and weasels, and they are living in multi- million dollar homes, and they face no penalties for all the lives destroyed. Among those whose lives were destroyed are people who had expanded their hard ware stores during the housing bubble, many of the trades people, and lots of businesses that indirectly benefitted from the housing bubble. (Restaurants come to mind, as do car dealerships, etc.)

  23. hyperpolarizer

    The Times quotes Geithner saying that millions were kept in their homes by HAMP etc; later on the Times notes that under the original HAMP about 66,000 homeowners were helped at all.

    There is truth there, by mistake, so to speak.

  24. William LeGro

    “REMICs, or real estate mortgage conduits, get pass through treatment (meaning the trust itself is not taxed, only the investor in it is when income is received).”

    Trust? What trust? Why do you write as if your readers are as well-versed as you in what you’re writing about? I mean, if they were, why would they need you?

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