For some reason this hasn’t been much reported on:
The TARP legislation included specific instructions to use a section of the funds to prevent foreclosures. Without that language, TARP would not have passed; Democratic lawmakers who helped defeat TARP on its first vote cited the foreclosure mitigation piece as key to their eventual reconsideration.
TARP was doled out in two tranches of $350 billion each. The Bush administration, still in charge during TARP’s passage in October 2008, used none of the first tranche on mortgage relief, nor did Treasury Secretary Henry Paulson use any leverage over firms receiving the money to persuade them to lower mortgage balances and prevent foreclosures. Frank made his anger clear over this ignoring of Congress’ intentions at a hearing with Paulson that November. Paulson argued in his defense, “the imminent threat of financial collapse required him to focus single-mindedly on the immediate survival of financial institutions, no matter how worthy other goals were.”
Whether or not you believe that sky-is-falling narrative, Frank kept pushing for action on foreclosures, which by the end of 2008 threatened one in 10 homes in America. With the first tranche of TARP funds running out by the end of the year, Frank writes, “Paulson agreed to include homeowner relief in his upcoming request for a second tranche of TARP funding. But there was one condition: He would only do it if the President-elect asked him to.”
Frank goes on to explain that Obama rejected the request, saying “we have only one president at a time.” Frank writes, “my frustrated response was that he had overstated the number of presidents currently on duty,” which equally angered both the outgoing and incoming officeholders.
Obama’s unwillingness to take responsibility before holding full authority doesn’t match other decisions made at that time. We know from David Axelrod’s book that the Obama transition did urge the Bush administration to provide TARP loans to GM and Chrysler to keep them in business. So it was OK to help auto companies prior to Inauguration Day, just not homeowners.
In the end, the Obama transition wrote a letter promising to get to the foreclosure relief later, if Congress would only pass the second tranche of TARP funds. Congress fulfilled its obligation, and the Administration didn’t. The promised foreclosure mitigation efforts failed to help, and in many cases abjectly hurt homeowners.
There’s always money for the rich when they get in trouble, but the rest of us are on our own.