By Pam Martens: August 29, 2012
There really are two kinds of Americans. One type is of the Ayn Randian persuasion, believing that rapacious capitalism without safety nets is an ideal model for our country. The other kind believes that our Nation’s children represent the future and each and every one of them – regardless of class, race or social circumstances – deserves a chance at a productive life.
The second kind of American is frequently derided as a soft-hearted liberal sop; but that’s a shallow analysis. We fail as a country when we fail our children – both morally and in terms of global competitiveness.
This is why the revelations in Neil Barofsky’s new book — Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street – are so disturbing. Barofsky was the Special Inspector General of the Troubled Asset Relief Program (TARP), put in charge to monitor how the hundreds of billions of taxpayer dollars were spent.
According to Barofsky, the Home Affordable Modification Program (HAMP) did not have a goal of keeping struggling families and children in their homes. It’s real goal, according to U.S. Treasury Secretary Tim Geithner, was to “foam the runway” for the banks.
Here’s an excerpt from the book:
“For a good chunk of our allotted meeting time, Elizabeth Warren grilled Geithner about HAMP, barraging him with questions about how the program was going to start helping home owners. In defense of the program, Geithner finally blurted out, ‘We estimate that they can handle ten million foreclosures, over time,’ referring to the banks. ‘This program will help foam the runway for them.’
“A lightbulb went on for me. Elizabeth had been challenging Geithner on how the program was going to help home owners, and he had responded by citing how it would help the banks. Geithner apparently looked at HAMP as an aid to the banks, keeping the full flush of foreclosures from hitting the financial system all at the same time. Though they could handle up to ‘10 million foreclosures’ over time, any more than that, or if the foreclosures were too concentrated, and the losses that the banks might suffer on their first and second mortgages could push them into insolvency, requiring yet another round of TARP bailouts. So HAMP would ‘foam the runway’ by stretching out the foreclosures, giving the banks more time to absorb losses while the other parts of the bailouts juiced bank profits that could then fill the capital holes created by housing losses.”
The evidence that this is exactly what the plan was is buttressed by the thousands of homeowners who have reported that modifications were promised, they had completed the paperwork, months or even years went by, then with no warning they were foreclosed on by their bank. They were the foam; this is the new American runway.