Housing Complex

Read: How Obama Did Too Little, Too Late on the Housing Crisis

Geithner to Obama: It's too much, Mr. President. (White House Flickr Pool)

This isn't specific to D.C.'s housing situation, but Zach Goldfarb's blockbuster story in today's Post about how President Barack Obama missed opportunity after opportunity to help the nation's homeowners is an important read for anyone interested in the subject. Unlike a lot of pieces about White House deliberations at the highest levels, this one has players like Peter Orszag on the record about how the administration's hesitation to force banks to stop foreclosures resulted in failed efforts to relieve homeowners of the underwater mortgages that continue to act as the economy's biggest ball and chain.

One dynamic that emerges: Housing and Urban Development secretary Shaun Donovan pushed for stronger action, recommending that the U.S. pay banks to reduce homeowner debt and require banks that received bailouts to take part in a mortgage modification program. But other advisors advocated for voluntary participation, and that view won out. Treasury Secretary Tim Geithner also argued that direct aid to homeowners would be more expensive and risk more moral hazard than spending money on construction projects and keeping public servants employed. So when Donovan made the case for more aggressive action on housing, Geithner pushed back.

It looks like the main takeaway is this: Obama knew that swift, decisive action was necessary, and announced programs that sounded like they had the right idea. But when it came to building in the mechanisms that would allow them to actually work, he was always convinced that the banks wouldn't go for it, or homeowners would abuse it, or Congress wouldn't fund it—which, after a while, proved to be true. And now, he's surprised and frustrated that those programs have had an almost negligible effect.

In the Washington area, there's a strong effort to counsel homeowners on their options, and the D.C. Council has made it harder for banks to foreclose on homeowners. Regionally, mortgage delinquencies are on the decline. But would they have gone faster if the administration had acted more decisively? Probably, yeah.

Comments

  1. #1

    Due to the infestation of Wall Street in White House via Tim Geithner and Obama's Chief of Staff, Daley, there also needs to be a Occupy the White House movement.

  2. #2

    @ strangefruit - I agree that the Wall street-Washington corridor is certainly a problem. I don't think it is fair to refer to Geithner as part of that "infestation." He has spent the majority of his career as a public servant, at treasury and the NYfed.

    The majority of the policies which the occupy wall street folks are against were done by a true example of "infestation" - Hank Paulson, not Geithner.

  3. #3

    Bizarre quote from Obama that the administration tried "to start lifting home values up."

    Why is pushing for an increase in housing prices -- i.e. making housing less affordable -- a public policy goal? Should the administration also push price increases of other necessities such as food, clothing and transportation?

    This is an issue for home buyers and their creditors to work out. Those who were prudent and didn't participate in the housing bubble shouldn't subsidize the greedy and stupid among us.

  4. #4

    The banks were never going to go voluntarily for a solution which had them taking a haircut, and nobody should have expected that! There was a lack of responsibility all around here. Sure - some people borrowed too much relative to their ability to service that debt. But for every borrower here is a lender, and there was a total lack of responsibility in their feeding frenzy as well!

  5. #5

    There been some underwater mortgages in the DC area, but let's be real – any mortgage aid would have gone overwhelmingly to auto-oriented Sunbelt exurbs, which were hardest hit by the crash. Not sure that prolonging those shitty land use decisions is really something that we should wish had happened.

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