walkitout (walkitout) wrote,

Ever ask yourself what Treasury was thinking over the last couple years?

h/t Calculated Risk:


Swagel knows people will call him self-serving, but I'm going to do it anyway: Swagel is self-serving.

If you believe that:

(1) You don't need to do detailed contingency planning ahead of time, but should instead ask for extraordinary powers and resources when an expectable crisis occurs, and
(2) Asking lenders to write-down principal is Anathema, and
(3) You don't need to tell the public what you have done, are doing, are contemplating doing -- even if it involves their money. Oh, and the public includes their duly elected representatives in Congress, and
(4) You think tax cuts are an effective form of stimulus when most of the consumers aren't paying much if any income tax, and
(5) You worry about moral hazard when the world is about to end, and
(6) It only occurs to you that you should be analyzing lender reputation AFTER you discover the crap has pervaded the system as a whole, and
(7) You think it's reasonable to proposal a solution to a housing crisis that is the result of a bubble popping by devising endless solutions that do not address the problem of people being underwater on their mortgage, and
(8) You think your role at the Govmint is to (a) not spend money and (b) nag at industry to Be More Efficient

Then, yeah. What Swagel says happened makes sense. Well, except for the whining about how the Treasury couldn't do anything because Congress wouldn't agree to it and the Administration had no focus. Because, after all, people who go into politics have NO IDEA it involves herding cats. For a guy who says "payment shock" is a misnomer because the rise in payment is a central feature of the loan, this feels a lot like hypocrisy.

I'm halfway through and relatively committed to finishing. I'm going to try to resist the temptation to post further details, unless some new feature of his bizarre thought processes exposes itself.

ETA: forgot to mention. He also thinks contracts are sacred and thus opposes letting BK judges cram down mortgages, which could be argued to be part of (2) above or a separate issue. And he seriously talked about the government lending money to homeowners to keep them in their homes, and making that a _tax lien_.

Here's the deal. Do not create contracts that take advantage of people. If you create a reasonable contract and something unforeseen happens that makes it unreasonable, renegotiate it. Enforcing unreasonable contracts in the face of totally unexpected changes in the situations of the parties to the contract reliably results in huge, unfair costs to some or all parties to the contract (like, lawsuits). Contracts are not supposed to be weapons. They are supposed to capture the details of an arrangement so that people know what they are supposed to do and what they can expect to get. What they can _expect_. Not what they will get, even if it means the end of the (or someone's) world. Treating contracts as sacred is bad parenting and worse public policy.
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