The Quarterly Report issued in October 2011 by the Special Inspector General of the Troubled Asset Relief Program (TARP) reveals the utter lack of oversight and mismanagement of funds in excess of $700 Billion Dollars. The 316 page report begins:
Through the Troubled Asset Relief Program (“TARP”), the American taxpayers became investors in hundreds of financial institutions, the auto industry, and cer tain markets for asset-backed securities, and the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) serves on the front line to protect those investments. SIGTARP is the only agency solely charged with a mission of transparency, oversight, and enforcement related to the taxpay ers’ unprecedented investment of hundreds of billions of dollars in the private sector…. This month…the first criminal charges were filed against senior executives of a TARP bank when two senior executives of United Commercial Bank (“UCB”) were charged in connection with an alleged scheme to defraud investors. The Department of Treasury (“Treasury”), and by extension the American taxpayer, became investors in UCB’s holding company when it received more than $298 million in TARP funds. UCB was the first TARP bank to fail and the taxpayers’ entire TARP investment is lost.
TARP included $45.6 Billion to fund the Home Affordable Modification Program (HAMP) of which only $2.5 Billion (5.4%) has been spent. SIGTARP addressed its concerns about the poor performance of the HAMP program to the Treasury Department, but states that “Treasury has determined not to take any further action to implement SIGTARP’s recommendations. Treasury is giving up a chance at mean ingful change and sadly, it is struggling homeowners who have the most to lose.”
The housing and mortgage crisis was a direct result of the increasing deregulation of the mortgage industry enabled by the Community Reinvestment Act of 1977 and the federal government’s ideological philosophy that everyone should and must be afforded their dream of home ownership, regardless of their credit worthiness or their ability to repay the mortgage. The federal government, through coercive threats of lawsuits for discriminatory lending practices, forced these lenders to make these risky loans.
The feeding frenzy of easy money, teaser interest rates, one hundred percent financing (generally involving two mortgages, a first mortgage for eighty percent of the purchase price and a second for the remaining equity, thereby eliminating the necessity for private mortgage insurance), no income or asset verification of the homebuyer and, in many cases where homebuilders were involved, up to one full year of mortgage payments paid in advance by the builder at closing in addition to the payment of all of the closing costs, increased the demand for new homes and drove up home prices. An additional caveat of the 80/20 scheme eliminated the requirement that the homebuyer escrow money with the lender for payment of property taxes and homeowners insurance. This resulted in massive losses of revenue at the city, county and state level.
These lenient policies precipitated the crash of the housing market and resulted in the loss of jobs for tens of millions of “innocents” involved in ancillary businesses affected by the crash.
Efforts under the former Bush Administration and the current Obama Administration to “fix” the mortgage crisis have failed miserably. Billions of dollars have been taken out of our pockets, or borrowed on our futures, to bail out privately owned banks and corporations that were considered “too big to fail”. The taxpayers had no say in the government’s actions in the TARP or in the American Recovery and Reinvestment Act of 2009 (ARRA), also known as the “Stimulus Bill”.
The first wave of mortgage defaults involved many home buyers who never intended to stay in their homes once they were required to begin making payments. Many more have been caught in this crisis through no fault of their own. They put money down on their homes and qualified with good credit histories and scores, good jobs and income, but now find themselves unemployed or underemployed.
It is time that these lenders show their gratitude to We the People for bailing them out. All of these mortgages should be modified to interest only payments of one or one and a half percent. If this were done for five years, people would be able to keep their homes, investors could rent their properties with positive cash flow, money would be flowing into the economy, property values would increase and the market would rebound. I am not one to force a policy or mandate on any entity or individual, but we must remember that we were forced to mortgage our futures and the futures of our children and grandchildren without any say in the matter. We lost trillions of dollars in property value and in our savings and retirement accounts.
The programs offered by the administration have not produced any positive results for the people of this country. The SIGTARP report clearly reveals the arrogance of the Treasury Department in refusing to heed its recommendations to help struggling homeowners. It is Big Government that created this problem. It is time We the People got our bail out.
[youtube tt5lFAto7TU Joe Walsh explains how government created financial crisis to his constituents]