Black Swan

It is not often that the NY Times will question the long-term consequences of any Democratic program ostensibly aimed at mitigating a short-term need.  So I don't want to fail to highlight this:

The Obama administration's $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

"The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis," said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. "We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway."


  1. roger the shrubber:

    wouldn't get *too* excited about this. IIRC, the times spent quite a lot of time blasting carter as the grinning incompetent dunce he was, and then, at the key moment in 1980, they.....endorsed him for president. the GOP could bring george washington back to life and run him for prez, and you can be sure the times would go after him as a "slave-owning oligarch old-time member of the white male power elite."

    still, it WILL be fun watching obama react to public criticism for the first time in his life. i rather suspect he won't handle well. ideally, he'll have a "captain queeg on the stand" moment at some press conference, rambling on about the disloyal racists who are scheming against him. "i proved it geometrically!" fasten your seat belt, mr. president: it's going to get bumpy. heh.

  2. Richard A.:

    When my Republican friends tried to frame Obama as some arch socialist who was looking to take over the country I always warned them to never attribute malice where simple stupidity would suffice. Obama will have his moment, but it won't be Queeg. It will be calm, reasoned assurance that everyone who disagrees with him is either a racist or someone earning six figures or more a year who doesn't want to "pay their fair share." Some in the man's administration are certainly lefty Queeg types, what's scary about 'The Precedent' as I call him is his actual lack of malice. He's just an honest dyed in the wool US liberal who has been in the echo chamber long enough to truly believe what he says and does is for the good.

  3. Fred from Canuckistan . . .:

    You might find this assessment interesting. From McKitrick of M&M

    Ross McKitrick: Reckoning delayed

    America faces serious economic challenges, and the government can only put them off so much longer

    By Ross McKitrick

    Late last June, I wrote about four potential problems that threatened the “green shoots” of economic recovery in the U.S.: the fact that Federal Reserve assets did not balance against the expanded monetary base, the pace of U.S. government borrowing, the California budget crisis and the coming wave of adjustable rate mortgage renewals in southern U.S. states. This is an update on how those issues have played out over the past six months.