Why Bank of America Won't Modify Your Mortgage

As a boy, I always loved the story of David and Goliath. Herewith, a modern-day update to the story. If I were a betting man, I'd take Goliath.

I was opposed to TARP ("Troubled Asset Relief Program") from the moment it was announced. I wasn't fully certain of all the reasons at the time, but something about it just didn't feel right. I've done a lot of reading since that day to try to understand it, and after my last call with Bank of America last week I believe I finally have the answer. There's a valid moral question about whether principal reduction on underwater mortgages should be the latest in a long list of government giveaways, and many are opposed to it. This administration, however, seems more than willing to hand out more candy to borrowers.

In the fall of 2008, when it was first proposed, TARP smacked of financial cronyism. Hank Paulson, former chairman of Goldman Sachs, was Treasury Secretary under President George W. Bush. Along with virtually every other financial institution on Wall Street, Goldman Sachs was among the market makers in dodgy financial instruments with disaster written all over them, despite their gold star ratings. (I learned later many of the market makers were selling the market short from another desk in their houses.) It's what they do -- they play both ends of the market. Nobody complains. It's all perfectly legal. So why should we as free Americans reward them for their risky behavior, I wondered? Those were my initial thoughts.

I wrote a letter to the editor of the Deseret News commending Congress for voting down TARP the first time. I've documented most of my feelings about all that on these pages in the past.

Fundamentally, there was a strong negative bias deeply embedded in my DNA against the philosophical roots of the bailouts for the financial institutions. I've been asked why. Would I have chosen a complete financial worldwide meltdown instead?

Here's my summation argument: By bailing out failing companies, Congress in effect decided to confiscate money (I use the word intentionally) from the productive elements of the U.S. economy, companies and individuals, and then made arbitrary decisions about which failing units to transfer it to. With banks who had ignored the risks and invested in sub-prime mortgage instruments assembled in securitization pools, Congress told us, "They are too big to fail. They must be rescued. Without the bailout there will be a worldwide financial catastrophe by Monday morning."

In the case of the auto industry, the government chose to sustain failed companies with obsolete or unsustainable business models. The unions imposed unsustainable demands, the company executives kept passing the higher costs along to consumers, and they deserved to fail. But by choosing to bail them out, the government prevented the resources of these failed and arcane behemoths of industry from being liquidated in the open market where other better-managed companies could have taken those resources and put them to better use in a thriving concern.

So everyone, including George W. "I'm a free market guy" Bush, held their noses and passed TARP. Congress went along with the dire warnings from Paulson and TARP was hatched. We learned later just how much lobbying money went into the re-election campaigns of those who voted "aye."

Back in the day when I studied Economics, it was a basic fact of life (I was told) that in a healthy free market we must permit failure to occur. (Sounds a lot to me like the arguments in favor and opposed to free agency in the pre-mortal world.) Success will be rewarded, but failure will also be punished by investors who will seek a higher return with commensurate risk elsewhere. It sounds so harsh, doesn't it? Survival of the fittest.

With a bailout, I argued at the time, the incentives are reversed. Failing companies are saved from their risky behavior and resources from the taxpayers are shifted arbitrarily by government, rather than being sorted out by the sometimes brutal efficiencies of the marketplace, where profitability is always rewarded. To this day I cannot understand how the bailouts were supposed to be good for our economy. In a country that I know rejects corporate business collusion, why would we as free Americans ever permit the government to pick and choose the winners and losers, when a free market economy does it so much more efficiently? Shifting those decisions to bureaucrats and politicians seemed exactly what we would want to avoid.

Here's a brief history of what happened in the infamous TARP bank bailout package of 2008, and then some comments about one participant's experience with one of the banks deemed "too big to fail" -- the one that services my mortgage:

Bank of America received $20 billion in the federal bailout from the U.S. government through the Troubled Asset Relief Program (TARP) on January 16, 2009, and also got a guarantee of $118 billion in potential losses at the company. ("US gives Bank of America 20 billion dollars in capital injection," Breitbart.com. 2009-01-15. Retrieved 2010-10-17).

This was in addition to the $25 billion given to them in the Fall of 2008 through TARP. The additional payment was part of a deal with the US government to preserve Bank of America's merger with the troubled investment firm Merrill Lynch. (Giannone, Joseph A. [February 5, 2009]. "U.S. pushed Bank of America to complete Merrill buy: report," Reuters).

Since then, members of the U.S. Congress have expressed considerable concern about how this money has been spent, especially since some of the recipients have been accused of misusing the bailout money. (Ellis, David [February 11, 2009]. "Bank CEOs flogged in Washington," CNNMoney.com. Retrieved March 31, 201).

Then CEO, Ken Lewis, was quoted as claiming "We are still lending, and we are lending far more because of the TARP program." Members of the US House of Representatives, however, were skeptical and quoted many anecdotes about loan applicants (particularly small business owners) being denied loans and credit card holders facing stiffer terms on the debt in their card accounts.

According to a March 15, 2009, article in The New York Times, Bank of America received an additional $5.2 billion in government bailout money, channeled through American International Group. (Walsh, Mary Williams [March 15, 2009], "A.I.G. Lists Firms It Paid With Taxpayer Money," The New York Times. Retrieved March 31, 2009).

As a result of its federal bailout and management problems, The Wall Street Journal reported that the Bank of America was operating under a secret "memorandum of understanding" (MOU) from the U.S. government that requires it to "overhaul its board and address perceived problems with risk and liquidity management." With the federal action, the institution has taken several steps, including arranging for six of its directors to resign and forming a Regulatory Impact Office. Bank of America faces several deadlines in July and August and if not met, could face harsher penalties by federal regulators. Bank of America did not respond to The Wall Street Journal story. ("US Regulators to B of A: Obey or Else," The Wall Street Journal, July 16, 2009).

On December 2, 2009, Bank of America announced it would repay the entire US $45 billion it received in TARP and exit the program, using $26.2 billion of excess liquidity along with $18.6 billion to be gained in "common equivalent securities" (Tier 1 capital). The bank announced it had completed the repayment on December 9. Bank of America Ken Lewis said during the announcement, "We appreciate the critical role that the U.S. government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest... As America's largest bank, we have a responsibility to make good on the taxpayers' investment, and our record shows that we have been able to fulfill that commitment while continuing to lend." (Bank of America to Repay Entire $45 Billion in TARP to U.S. Taxpayers, PR Newswire, December 2, 2009; "Bank of America Completes US TARP Repayment." 12-10-2009. Retrieved December 12, 2009).

Now to one man's story about trying to deal with the beast. First, there are no real live people working in Utah for the Bank of America with whom a mortgagor (borrower) can speak. All communication with Bank of America is done via mail or telephone. I have personally had to deal with them at three different physical locations and multiple phone numbers.

My mortgage was originated in 1997. After two and a half years of unsuccessfully attempting to modify my mortgage for a lower interest rate, I finally wrote a letter expressing my frustrations as follows:


November 10, 2010

Bank of America Home Loans Servicing, LP
390 Interlocken Crescent, Ste 350
Broomfield, CO 80021

Bank of America Home Loans Servicing, LP
PO Box 650070
Dallas, TX 75265-0070

Office of the Attorney General, Mark Shurtleff
Utah State Capitol Complex
350 North State Street Suite 230
SLC UT 84114-2320

REF:  Bank of America Mortgage Loan #xxxx

Gentlemen:
I received a telephone call from Bank of America this week informing me, “Your request for a loan modification has been declined.”  Further, I was informed I would be contacted next by a “negotiator” who would share with me my “options” within the next 30-45 days.  Now I’m wondering who the “negotiator” will be representing, and what will be “negotiated.”

Attached (click to enlarge), please find a letter dated March 30, 2010, in direct contradiction to the phone call, stating “You qualify for a permanent modification of your home loan under the Home Affordable Modification Program.”  I was told “we will be sending it to you soon.  Please be on the lookout for a package in the mail and return the Agreement to us by the requested date so that we can finalize your loan modification.”  That was SEVEN months ago!  The mailbox is still empty.

I am hoping what we have here is a case of the left hand not knowing what the right hand is doing.  The question before me now is which Bank of America do I believe?  My approval letter came from the first address listed above.  I have been making my payments to the second address listed above.

The person with whom I spoke most recently indicated I had passed “three stages of approval,” but somehow for reasons not adequately explained as she read from a prepared script that I had failed some test in the “fourth stage” of the approval process.  Until that phone call, I was unaware about anything regarding “stages of approval.”

I have made my trial payments of $xxx per month without fail since the first agreement dated July 3, 2009, after being told there was a “three month” trial period.  If this final stage development in the result of underwriting that was done over a year ago, you undoubtedly are making a decision that should be updated with fresh financial data which I would be happy to supply.  My income is still a fraction of what it once was, but I assure you it is sufficient today to more than qualify under a modification if reviewed and updated.  Fifteen months (two birthdays) have come and gone since the underwriting was originally done.  I’ve made the trial payments faithfully as agreed.  The whole drawn out process has now been in play for FIFTEEN MONTHS!

Your communications to me have now put me in an “awkward position,” to be stating it as simply as I can.  I have acted in good faith.  However, Bank of America has done the opposite, it appears, unless there is a simple explanation you can offer besides another phone call from someone reading a script.

When sharing my dilemma and my frustration this week with a good friend who is also a mortgage broker here in Utah, I was advised to take my case to the Attorney General of Utah, Mark Shurtleff, because in his words, “Bank of America has become the poster child for how not to handle foreclosure procedures.”  I have also copied Shurtleff’s office on this letter.

I am writing to inform you that until I hear back from you (is ten days enough time?) I will proceed as advised and bring action against Bank of America through my legal counsel, who is also copied on this letter for specific performance by Bank of America under the letter dated March 30, 2010 (see attached) upon which I have relied.  You can’t treat your customers this way.

Sadly, instead of resolving my loan with a modification to assist me in keeping my home, I am left to hope I am wrong in the assumption I am being victimized.  I still believe we can resolve the matter amicably.  However, I assure you I will not become another mortgage foreclosure statistic under these specious circumstances without some clarification I hope will be forthcoming.

I have relied upon your representations under the “Making Home Affordable” program.  I will herewith resist any and all efforts, legally or otherwise, from your office unless or until you make good on a modification offer as originally represented.

Thanks for your immediate attention to this matter.

Sincerely yours,

David B. Goates

Another five months elapsed before I heard from them again. Instead of a real person calling me back, I received yet another form letter advising me my note was in default (and has been for two and half years since this process began), and that I had three options: 1) a short sale for which I would not be held liable for the shortfall if I cooperated; 2) a deed in lieu of foreclosure, also helping me avoid liability for the shortfall; or 3) a rental contract if I wanted to continue living in the home after surrendering the deed, also escaping liability for the shortfall. I wrote back and indicated I wanted to stay in my home and that I would begin making the full payments once again, which I have been doing recently. However, the note is still in default technically and the issue is now compounded because the shortfall has increased as the effects of the negative amortization have increased the outstanding balance.

Nowhere in the communication was there a reference to any specific point I raised in my letter. Days later I received a call from a "customer service representative," who once again read from a script and suggested that I apply online for yet another modification application, stating, "The program has been improved and updated."

So I did as suggested and called the department given to me to remain proactive. Rather than discuss a new modification agreement, however, I was given to a collector whose first question was, "When do you intend to make a payment to bring the account current?" I explained why I was calling, was transferred to another representative, then to another who took down my financial information, and concluded by saying, "Based upon the information you have given me today, I am sorry to inform you that you do not qualify for a mortgage modification at this time, Mr. Goates." I asked for the specific reason(s) why I did not qualify. I was put on hold for five minutes, then the line went dead.

I have decided to tell the story publicly now. There remains little hope of reaching a resolution with anyone at Bank of America. And why, you ask?

My mortgage was originated by a little mortgage loan broker, then it was sold in the secondary market and scooped up by Countrywide, who was acquired by BoA, who is merely the servicer of the mortgage. Because my mortgage is owned now by Fannie Mae as part of a larger securitized mortgage pool that was eventually sold to investors, it is virtually guaranteed that the loss on my mortgage will be covered by Fannie Mae via the bailout money available under TARP. 

The banks too big to fail were saved, but the public relations message of wanting to keep borrowers in their home is little more than a scam. There is virtually no incentive for a bank to work with a borrower. They come out whole by systematically removing all their delinquent borrowers from their homes, bidding their total mortgage balance at sale, then cleaning their books and collecting their reimbursement check from the government. 

Despite a warning shot across the bow of Bank of America's ship last week from Utah Deputy Attorney General John Swallow, warning BoA they were not in compliance with Utah statutes by failing to provide local personnel to be available for face to face meetings with residents of Utah, there is little doubt in my mind that BoA, the country's largest bank will find a way to comply and foreclosures will proceed.

Because of our elected representatives in both houses of Congress in Washington D.C., who picked the winners and losers in their infinite wisdom, why would any bank today choose to work with a borrower if the government is waiting in the wings with an open checkbook to cover their losses?

"Symbolic" House Vote Repeals Obamacare

It was newsworthy last week only if you don't tune in to the mainstream media.  They didn't give it much play.  But the newly-elected Republican-dominant U.S. House of Representatives resoundingly voted anyway by a margin of 245-189 to repeal the most costly entitlement program in nation's history.  They don't call this body "The People's House" for no reason!

It's no secret I was opposed to it from the moment it was announced, but more than being opposed to it, I was opposed to HOW it was done.  It is that aspect of the ongoing debate that interests me most today.

There was opposition to Social Security when it first was introduced and enacted into law.  But there was no vote within a year to repeal it.  That was also the case when Medicare was first introduced, along with Medicaid.  None of those programs faced this kind of perpetual anger and frustration from the public, united in their dislike in majority numbers. 

How it was done

The difference in my mind is that unlike Obamacare, the other entitlement programs listed did not pass on a one vote margin bought and paid for in the middle of the night on Christmas Eve in the Senate.  Further, one year after its passage Obamacare has managed to inflame half the states in the nation who have gone to court to challenge its constitutionality.  None of those other programs were struck down within a year of their passage as "unconstitutional" by a federal court.

Handout or empty hand?

We have all been partaking at the trough of government entitlement programs for a long time, and the majority of Americans now like them.  The difference with Obamacare, in my humble opinion, is that it represented a bridge too far in the minds of Americans.  Rather than welcome a handout when the economy had punished so many so severely recently, they pushed back knowing it was not a hand up, only an empty hand promising unsustainable debt and deficits.

Most economists and others who have studied its provisions (I have not) now conclude there is little of anything representing cost savings in the measures enacted.  It went too far, and fewer and fewer have indicated they really want more government intruding into their lives and their choices, especially when it is being paid for with more foreign debt.

Maybe more than symbolic

There is some indication, however, the vote may actually be more than symbolic.  Often, split government produces real progress.  A measure proposed by the White House to a divided Congress thought to be DOA is often debated fairly, both sides expressing their views and a helpful and useful conclusion reached.  Those were the days when a Ronald Reagan could persuade a Tip O'Neill that tax cuts in a bad economy might just be a good idea to present to a Democratic Congress.  It's happened before, why not again? 

The useful reality about debate and a straight up or down vote on proposed measures is that such actions put people on the record, forcing them to declare themselves, compelling them to take a stand for their constituents, and revealing whether or not they give a hang about what their bosses, the people, think and believe.  That's why this vote to repeal is maybe more than symbolic, even though everyone knows it's not a big enough margin of victory to be veto proof and Harry Reid won't let it see the light of day in the Senate, thus dooming it to "symbolic" status.  But only for now, perhaps.

I'm hoping what will happen is Obamacare will die a death of a thousand cuts.  This vote last week extends the debate; opens it up for the first time, really.  Voters will increasingly use the information they glean from successive votes to gauge whether or not they need to do further reassessments about whom they will choose to represent their wishes.  In that sense it may go beyond "symbolic."

SCOTUS will weigh in

I'm wondering what impact this vote will have on the eventual judgment to be rendered by the Supreme Court, where Obamacare will ultimately be adjudicated.  Knowing the Constitution trumps all the laws of the land, will the expressed will of the people stand?  I'm wondering if the SCOTUS also realizes they are subject to the people.  I hope they still are.

Predictably, the administration poo-pooed the whole exercise last week.  Nancy Pelosi openly ridiculed a reporter last year who asked her if she was concerned about its constitutionality, with "Are you serious?"  Well, now we know the people are serious, and so was at least one federal court judge in Virginia.  If this repeal vote was merely "symbolic," then someone forgot to inform the White House about how seriously the new members of Congress have taken their oath to reflect the people's will when they got to Washington.  They heard the message from the voters, loud and clear.  That's why the vote had to be taken -- it's the primary reason they were sent there.

Real health care reform will happen when Obamacare is reversed.  Congressman Jim Matheson (D-UT) said it best:  "It reforms too little and costs too much."  He voted against it last year because he knew he would have no chance for re-election if he had done otherwise, and remains practically the lone man standing among the so-called "Blue Dog" Democrats in Congress who went along with Obamacare.  However, last week he reversed course and voted against repeal.  Go figure.

Why the sustained anger?

So maybe, just maybe, it is more than "symbolic."  There was more than Obamacare factoring into the historic tidal wave that washed ashore last November in Washington.  The voters felt disenfranchised and they were angry at not having their wishes realized.  For me and the vast majority, it started with TARP that opened the floodgates for rampant ($862 billion) stimulus spending failing to stimulate as promised, and a $1.3 trillion price tag on health care reform.  The deficit climbed rapidly to over $1 trillion, then the red ink flowed to overflowing with bailouts for "Government Motors" and Chrysler.

So Americans reacted justifiably -- we tossed out nearly everybody we could and began again, as America does every two years.  It's why this country is so viable.  Even when we make mistakes in judgment the founders gave us the reassurance we could begin afresh every two years.  We've all had to make readjustments in our lives these last two years.  We've cut back, we're learning how to save again, we're reducing debt, and we're somehow surviving in spite of it.  And now we demand the same of our federal government.  Some say individual households don't operate the same way as government.  That's true, because the government can print money.  We can't.  We can send representatives to Washington, however, who will do as we do and stop the presses.

Watch for more fiscal responsibility and big reductions in spending.  Those who refuse will be voted out.  That's the way politics works.  The Piper will be paid.

Chipping away now at Obamacare, and if Americans increasingly can stand by their convictions that it won't produce anything but grief if left to another generation to pay for it, then a large enough majority in both houses of Congress and maybe the White House in 2012 can finally bury it so deeply it cannot resurrect.

Federalism must be re-enthroned

The analysts I have read have been uniformly critical about the measure doing nothing to solve the upward tilt of the cost curve associated with health care, references to "bending the curve" in the years ahead notwithstanding.  Obamacare doesn't address the escalating costs associated with malpractice lawsuits.  The states were given virtually no latitude to develop their own solutions, since health care, like education, is administered at the local level.  Utah was already well underway in its efforts.  Federalism (giving states the right to be self-determining) has all but died in the wake of Obamacare.

Finally, one would hope the individual mandate in the law, forcing Americans to buy health insurance or face fines, must certainly be declared unconstitutional in the end.  This is still America, the land of the free.

But rather than let the moniker "the party of NO" stick, Republicans would be well advised to form committees, hold hearings, and work to craft real solutions lacking in Obamacare.  Keep the parts (if there are any) that might work, and scrap the rest.  We do have a health care crisis.  The costs are out of control, the incentives are skewed in the wrong direction, and Medicare and Medicaid are already too much to bear in a bankrupt nation borrowing to sustain an "even keel" level of care.  What do I mean by "incentives" being skewed?  Physicians and health care providers are reimbursed for a never-ending cycle of life-sustaining expenditures for seniors that extend life but sometimes with the tradeoff for quality of life compromises in the name of advancing medical science.  Aged grandparents and great-grandparents become little more than lab rats for government funded research.  Is that too harsh for you?  That's what we've got now.

Re-enthroning states' rights linked with free market competition among carriers would be a huge first step.  Given choices, let consumers be in charge of their care.  Intermountain Health Care is well on the way to showing the path to the rest of the nation.  The federal government needs to stand down and get out of health care reform and education.

The House last week finally heard and acted based upon the will of the electorate.  Yes, it may be "symbolic" as a repeal vote this year, but if the trend continues look for the electorate to take back the other chamber and the White House before the real damage is done when Obamacare kicks into high gear in 2014.  The question remains, will the angst survive another two years?

Power still resides in the majority that can choose to defund or repeal.  This "symbolic" vote was the first step.

Top Four Reasons Liberalism is Failing

I hate to be the messenger of bad news -- I'm always looking for the bright side.  However, there are hard data now emerging to suggest the liberal agenda advanced by President Barack Obama for the past eighteen months is failing miserably.  It isn't just your imagination.  I have been stunned -- more honestly AMAZED -- that we have been revisiting socialist ideas as the way to heal America's economy.  I thought we had grown up in our thinking.

But I digress.  Here are the top four reasons I'm seeing:

1.  The housing market is still in dire straits despite all the bailouts and the stimulus legislation that's been thrown at it.  Instead of the government trying to solve this problem, letting foreclosures proceed and the market finding its own bottom, the administration has actually slowed the readjustment in pricing by artificially trying to prop it up.  The first-time home buyer tax credit expired in July.  The result from this artificial "prop" to housing pricing was predictable, reaffirming we haven't found the bottom yet.  This week, the National Association of Realtors reported July sales of existing homes fell by 27 percent from June of this year and by 25.5 percent compared to July 2009.  The annual sales rate of 3.83 million homes, they stated, was the lowest since NAR began keeping track of sales in 1999.  Further, the Commerce Department reported July sales of new homes fell 12.4 percent from June and by 32.4 percent compared to July 2009.  The annual rate of 276,000 new units sold is the lowest since 1963, when government records were first kept.  The source of the plunge is no secret: July's numbers reflect the first month when existing home sales received no boost from the home buyer tax credit.

2.  New automobile sales are drying up after the ill-fated "Cash for Clunkers" program ended.  Again, it was an artificial "fix" that didn't fix anything.  New automobile sales tanked when the program ended.  General Motors' sales dropped 36 percent in September 2009 compared with August.  Ford collapsed by 37 percent, and Chrysler sales dropped by a similar percentage, 33 percent.  So who's benefiting in the car market?  It's not the manufacturers of new vehicles.  Used car sales have rocketed up this year, and your local mechanic is doing a land office business.  Because everyone's credit has been dinged, people are hanging on to their used cars and getting them repaired or buying a lower-priced used car.  It can be traced to the government's intrusion into the marketplace.  When does the government finally wake up to the reality that you can't provide a "free lunch" to everyone?  When you provide this grab bag of goodies with borrowed money from the Chinese, you don't create new wealth in the U.S.  All that happens is the government moves money around from one "pocket" to another, but nothing of value is being created.  It's Economics 101.  Unfettered markets would find the right places to put the money without a government-mandated program.

3.  Stimulus spending isn't stimulating much at all. Government spending does not stimulate economic growth. All it does is move resources away from one sector of the economy to another. Pick any "central government" in the world -- their track record for correctly and efficiently allocating resources is abysmal.  The USSR, with a GNP 1/6 the size of the U.S. economy in the 80s was outspending us in military spending 3:1.  We all know how Ronald Reagan exploited that disparity and convinced Mikail Gorbachev their priorities were going to bankrupt them.  All Reagan had to do to end the cold war was to convince them we were not the least bit interested in their destruction.  Remember "MAD?"  It was the acronym for Mutually Assured Destruction, and it was flawed.  When government attempts to allocate resources, jobs are lost, not created, in the shuffle and the transfer of the resources.  Why liberals can't see this simple fact is hard to fathom.  I was astounded back in February 2009, when I heard President Obama, say:  "This is not something that we're just doing to grow government. We're doing this because this is what the best minds tell us needs to be done." That statement is either naive or intentionally misleading.  Evidence from past history suggests exactly the opposite.  The "best minds" in today's administration must be dead wrong in their assumptions.  Forty-five years ago, when he was still Governor of California, Ronald Reagan asserted: "Anytime you and I question the schemes of the do-gooders, we're denounced as being against their humanitarian goals. They say we're always 'against' things — we're never 'for' anything. Well, the trouble with our liberal friends is not that they're ignorant; it's just that they know so much that isn't so."  I told you he was the "common sense purveyor," remember?  You could lift that line right out of today's headlines -- "The Republicans are the party of 'No.'"  Things haven't changed much.

4.  The Home Affordable Modification Progam has been a dismal failure.  I was invited to participate in the program last year -- one year ago this month -- by making three months of reduced mortgage payments during a "trial period."  So I made the first three trial payments, then the fourth, fifth, sixth, seventh, and eighth without so much as a word about what was happening to my loan.  Finally, four months ago I was told I was approved for my modification, and to be sure to look for my new modified mortgage papers in the mail "within a matter of days."  You guessed it -- nothing yet, and we're now in the second year of waiting patiently for President Obama's rescue package.  Some stimulus.  At a meeting last week with leading economic bloggers, attended by Obama's economic advisor, Treasury Secretary Timothy Geithner, the program designed to help homeowners avoid foreclosure was discussed.  Not surprisingly, the "best minds" in government judged "HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock."  Really?  Because it "helped banks" it's a success?  Really?  And what about the little people?  How's that been working out so far for all of you? 

Shocked at the admission that HAMP was meant to bail out banks and not help owners, Media Matters fellow Duncan Black wrote: "When Liberalism Doesn't Work It Discredits Liberalism." 

Liberalism is not working. Socialism is a failed experiment.  Charles Krauthammer weighed in on this topic in the Washington Post.  As usual, he nailed it on the head with even more ammunition than I've used here.  The sooner we leave it in our rearview mirror, the sooner the American economy can get back on track unaided by its government's "best minds." 

We'll find out in the coming months just how discredited it is in the eyes of the American people.  The best gauge you can watch is what happens in the mid-term elections on November 2nd.  And, yes, I AM wishing time away until then. . .

More analysis of Dodd-Frank

The negative reactions to Dodd-Frank continue to surface, this analysis from Gary Becker and Richard Posner.  These are smart guys, in whom I have much more confidence than the members of Congress.  I continue searching for some independent voice out there who has a positive view of this pending legislation, but beyond the Senators and Congressmen who are touting it I find few who recommend it.

Like most titles of legislation Washington produces, this title is once again misleading. The so-called “Financial Services Reform” bill is anything but reform. The AP, reports that “Sens. Olympia Snowe and Scott Brown pushed sweeping financial legislation to the edge of final passage Monday, both announcing they intend to support the regulatory overhaul despite initial misgivings.” Gary Becker and Richard Posner write on The Becker-Posner Blog the following 5 faults with this legislation:

1.  “The bill adds regulations and rules about many activities that had little or nothing to do with the crisis.” - This bill is over 2,000 pages in length like Obamacare and is a complete mess of new regulations and the establishment of multiple (not just one) new administrative agencies. Extraneous measures were added to this bill not even related to the systemic causes of the 2008 financial crisis, and that is an outrage. Becker-Posner write that “the bill gives the Fed authority to limit interchange or ’swipe’ fees that merchants pay for each debit-card transaction.” This is nothing more than voodoo politics -- save the masses from a minor fee that touches their lives every day, then allow them to pass it along in some other fee down the road.  It is not beyond the realm of possibility this bill could also trigger more financial crises than it cures.

2.  “The Dodd-Frank bill gives several government agencies considerable additional discretion to try to forestall another crisis, even though they already had the authority to take many actions.” Does anyone you know think that giving the federal government more expansive power is a good idea?  Now is the time to LIMIT government, not expand it.  Who wants to give Treasury and the Fed vast new powers to address a crisis when they already have authority to address whatever they need to with existing powers?  Honestly, Congress is either brain dead or they think we're just stupid lemmings.

3.  “Insufficient capital relative to bank assets was an important cause of the financial.” The bill has a complicated means to require more capital, yet Becker-Posner argue that a simple requirement would have been a better means to require more capital reserves in banks.

4.  “One of the most serious omissions is that the bill essentially says nothing about Freddie Mac or Fannie Mae.” This bill does nothing to reform or abolish Freddie and Fannie. The Foundry argued that, “supporters of Sen. Chris Dodd’s financial regulation bill say it will end financial bailouts. In fact, the Senate — anxious to reassure Americans on that fact — even added an amendment last week with a stated purpose ‘[t]o prohibit taxpayers from ever having to bail out the financial sector.’ But someone forgot to tell the folks across town at Freddie Mac and Fannie Mae. Freddie last week announced it had lost $8 billion in the first quarter of the year, and would be asking for another $10.6 in taxpayer help. And today, its twin Fannie announced a $11.5 billion loss, and asked for a further $8.4 billion in aid from taxpayers. That’s in addition to the nearly $145 billion in aid to Fannie and Freddie have already received.” And Dodd and Frank continue to tell the bald-faced lie this bill is “reform” when nothing is being done to abolish an organization that has wasted over hundreds of billions of your tax dollars? They were the chairmen of the respective committees that caused the crisis, and now they would have you believe they are the problem solvers through regulation?  This bill is not reform. Any legislation that purports to conduct reform and does nothing about Fannie and Freddie is not reform. Don’t be fooled by this legislation, because the elites in Washington will do anything to protect friends who have worked at Fannie and Freddie.

5.  “Many proposals in the bill will have highly uncertain impacts on the economy.” Becker-Posner point to new mortgage regulations, hedge fund regulations and consumer “protections” as three examples of new red tape that may slow and already slow economy. Yet again, the elites in Washington think they know better than the experts on Wall Street and have chosen to empower bureaucrats.

This bill is terrible policy, omits real reform and it may harm the economy. Despite fears and warnings, however, once again this legislation is one Senate vote away from a Presidential signing ceremony.

Senator Scott Brown's (R-MA) supporters need to rethink whether he's a real conservative if he ends up voting for this trash.