In truth, Mr. Salmon did not say that Geithner and His Evil Minions™ see themselves as nothing more than a way to support the banksters, but that is the basic take away that I see here:
Well done to Shahien Nasiripour, who did the best job of anybody, at the Treasury blogger meeting yesterday, at getting Treasury’s officials to commit news. Specifically, he asked about Sheila Bair’s sensible idea that mortgage principal write-downs can help keep homeowners in their homes while also maximizing the value of the mortgage to the issuing bank. And he was told, quite clearly, that Treasury has been talking to Bair about this idea, and that if it makes sense at the bank level, it probably makes sense at the federal level, too, as part of the HAMP program to make mortgages affordable.(emphasis mine)
Except that once the meeting was over, its main architect, Treasury flack Andrew Williams, emailed Nasiripour to walk that particular idea back, saying that Treasury was NOT (his all caps) going to do anything “major” in terms of principal write-downs, and that any moves in that direction would be no more than “tweaks”.
………
It seems to me that insofar as Treasury has a problem with principal write-downs, that’s clearly a function of the fact that it’s worried about the consequences for banks’ balance sheets. We’re prosecuting a muddle-through strategy right now, where the government artificially props up house prices by providing substantially all of the mortgage finance in the country, in the hope that with economic recovery will come enough of a natural rebound in house prices to let the government slowly remove its support without them falling dramatically again.
Unless the Treasury is banking on 6% inflation a year for the next 8 or 9 years, this is not going to happen.
House prices are still over valued, whether you use price to income, or rent to own (and rents are dropping too), and we are not going to see a recovery until house prices
This is complete regulatory capture, pure and simple.
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