The cruelty of HAMP
Conning homeowners by announcing a government program designed to help them when in fact it was designed to help the banksters is, in my world, “cruel.”
It’s a powerful point, and it’s definitely one of those things which Treasury is only going to say off the record. Even when Waldman was told it on deep background, he characterized it as “surprisingly candid”.
Treasury told Waldman — and told my group of bloggers, too — that HAMP, even if it was a failure, was a success. It might not have helped much in terms of its ostensible stated aim of permanently modifying millions of home loans. But it did help in at least three other ways: it gave temporary tax and payment relief to millions of homeowners; it massively reduced the rate at which homeowners in default were being foreclosed on; and, in the words of Waldman, “it helped banks muddle through what might have been a fatal shock”.
Was HAMP a bait-and-switch? Did Treasury know all along that it was likely to fail in its stated aim, but go ahead with it anyway because of its second-order effects? That seems to be the message they’re sending — that HAMP was a way of encouraging owners to apply for loan modifications, not because they were likely to get those modifications, but just because the sheer fact of applying for the modifications would help out homeowners generally, by reducing the rate of foreclosures, and banks too.
At the same time, I find it hard to believe that Obama personally was quite that cynical when he announced HAMP. And even within Treasury, I suspect that there was rather more hopefulness and rather less cynicism than the present viewpoint would suggest. On the other hand, if Treasury really did think at the time what it’s thinking now, Atrios is right. It’s undeniably cruel to raise people’s hopes like that if you know those hopes will end up being dashed.