Big banks are the bad guys – everybody knows that. We do have different reasons for thinking so. A couple of well-timed bankruptcies could flush out some of the bad actors, but that is not being allowed to happen. Foreclosures, though? Sure. Kick those bums out of their houses. Many haven’t made a mortgage payment for two years, so it’s high time!
IFO’s reasons are “that too big to fail” is bad, in and of itself.
Once upon a time at Michigan State Univ. one of her favorite professors was Walter Adams, z”l. Prof. Adams was constantly ragging on General Motors – heresy in that state! He said the company wasn’t malevolent. Rather, it was like a huge dinosaur. Just walking behind it could get you smashed to death by its huge tail. It wouldn’t even know it had killed you.
This is what we are dealing with in our housing crisis. Big government + Big Finance is a recipe for disaster. Players do not understand the problem, its cause or the solution. The one-size fits all approach is no good when you are dealing with millions of contracts.
So, we have the infamous HAMP (Home Affordable Modification Program), which isn’t doing what govt people had claimed for it. The name alone is a clue. The post-Modern meaninglessness gives it away.
The WSJ had a great line: “Treasury devised HAMP on the fly two years ago as the worsening economy sent foreclosures soaring.” And later in the same article, “The government has set aside $46 billion in funds from the 2008 bank bailout for assistance to homeowners, partly for incentives to mortgage companies, but only about $2 billion has been spent.”
Sound familiar? It sure does. The $1 trillion stimulus package also hasn’t been fully spent either. Part of this is intentional – funds will be shaking loose by about, oh let’s see – next summer???? The unintentional part is the well-known slow pace of any bureaucracy.
BTW, HAMP is not “assistance to homeowners.” It is assistance to BANKS. But, we digress.
HAMP was instantly a failure, as numerous TV and print and Web articles have pointed out. Artificially propping up failing institutions simply postpones the inevitable. Best to get it over with quickly. We can’t keep pretending that the real estate market “has hit bottom,” until it is allowed to fall to its natural level.
Check out some of the excellent real estate sites listed on our blog roll for detailed looks at the situation.