"We Were Just Kidding," Treasury Sez. "Wait, You Believed It?"
Should we be relieved or mad as hell that Treasury Department suits seem to realize their public comments on the economy are baloney?
Steve Randy Waldman tells the story of a meeting with some Top Men, including Treasury Secretary Tim Geithner himself.
The meeting goes well. Waldman confirms reports that Turbo Tim in person is a hale fellow well met, very different from the schlemiel he plays on TV. One official acknowledges that lack of demand is the reason businesses can't expand, not lack of access to debt. Another official sees "two or three difficult years ahead of us yet," which seems optimistic but is somewhat sober.
The real meat, however, comes in the discussion of the Home Affordable Modification Program, wherein Treasury's good ol' boys let on that, hey, it was all just a dodge to help the banks:
Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of "extend and pretend", but I don't think that's quite right. This was extend-and-don't-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with "the system", "the economy", and "ordinary Americans". Treasury officials are not cruel people. I'm sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.
What should an intelligent person make of this? Alex Tabarrok calls Waldman's post "very good and accurate," and I'll leave out the possibility that he means "the parts that are very good are not accurate and the parts that are accurate are not very good." So here is the most charitable way I can characterize these comments: They're making a variant of the "Thanks to NASA we have Tang" argument. Or a more recent cover version: "OK, so Cash-For-Clunkers didn't do squat for the environment, but look what it did for car sales." That is, they are admitting HAMP was not about keeping people in their borrowed homes at all. Instead, it was about bailing out Treasury's bank buddies.
If I were a mortgage deadbeat, I'd be enraged. Since I'm not, I'm grateful to learn that at least these bastards know what planet they're living on.