The Obama administration’s failure to spend almost any of the $7.6 billion in TARP housing money set aside for the neediest regions of the country seems counter-intuitive. Why let all but 3 percent of the funds just sit in the Treasury Department’s accounts for two years, unspent, when millions of the president’s most loyal supporters were struggling to maintain a roof over their heads?
The Hardest Hit Fund was specifically targeted to homeowners in areas most seriously impacted by unemployment and falling home values – a formula tailor made for Black and Latino communities devastated by massive foreclosures and layoffs. With the $7.6 billion already in hand, the administration could have won political points with its base at no cost. But instead, hundreds of thousands of the intended beneficiaries were allowed to lose their homes. What could Obama, or his Treasury Secretary, Tim Geithner, have been thinking?
The problem was, Obama’s people resisted putting the program into effect. A report by the Special Inspector General for the TARP program found that Geithner’s department hardly even tried to get bankers to cooperate with the Hardest Hit Fund. Instead of leaning on the banks to participate so that homeowners could take advantage of the federal help, the Treasury Department most often left it up to the states, many of which have little ability to influence banking institutions. Essentially, the Treasury Department behaved as if the program wasn’t there.
That’s quite similar to inspector general reports on the larger Home Affordable Modification Program, which President Obama promised would help three to four million homeowners, but actually assisted less than a million. With this program, too, the administration refused to pressure banks to participate.
The problem begins at the top. Obama has consistently protected bankers’ rights to deal with homeowners as they please.
