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Will partisan bickering give way to good recovery plans?
comments (0) December 12th, 2008 in Blogs
Richard Defendorf, contributor
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Not to put too fine a point on it, but economic recovery proposals often are as much about political ideology as they are about developing sensible programs and policies.
It’s expected that many analyses of how we got into this mess will take a partisan view. While acknowledging that credit rating agencies such as Moody’s and Fitch deserve blame for certifying securities backed by subprime loans as good investments, Howard Husock of the Manhattan Institute, a conservative think tank, also targets government policy that provided incentives to make imprudent loans in the first place.
“When we round up all the culprits,” he wrote this week in a New York Times op-ed piece, “we shouldn’t ignore the regulators and affordable-housing advocates who pushed lenders to make loans in low-income neighborhoods for reasons other than the only one that makes sense: likely repayment.”
He has a good point, and with the benefit of hindsight, there will be plenty more good points to make as we examine the pathology of the meltdown and our attempts to deal with it.
One disappointing consequence of political gamesmanship in Washington is the failure to implement the foreclosure relief plan pitched a month ago by Sheila Bair, chairman of the Federal Deposit Insurance Corporation. A story published Thursday by the Times points out that critics of the plan, mainly within the Treasury Department and the White House, claim it will be costly (requiring as much as $70 billion), that it underestimates how many people would re-default after their loans were modified, and that it would “pay off people who knowingly made bad decisions and lenders who created the subprime crisis,” as the White House deputy press secretary, Tony Fratto, put it.
The FDIC says those issues are hardly troubling enough given the bigger problems likely to arise by failing to act. And Bair, a Republican, notes that the FDIC has been working on loan modifications for 20 years. “I’m frustrated that nobody gives us any deference for knowing how this stuff works,” she told the Times. “And at the end of the day, I’m happy if Treasury just picks a plan and does it. Even if it’s not my plan, its better what we’re doing right now.”
Like Husock, she has a good point. Unfortunately, the Bush administration says it is still “reviewing” plans, which is code for hurry up and wait.
January 20 can’t come soon enough.
posted in: Blogs, business
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