Housing bail out not working, Barofsky says

Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (TARP), speaks during a hearing of the Senate Finance Committee on Capitol Hill July 21, 2010 in Washington, DC. The committee called Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (TARP), Elizabeth Warren, chair of the Congressional Oversight Panel, and Richard Hillman, Managing Director Financial Markets and Community Investment Team at the US Government Accountability Office, to testify about status of the TARP.


Kai Ryssdal: The Senate Finance Committee got an earful today from Neil Barofsky, he's the TARP inspector general. He was talking about how taxpayers aren't getting their money's worth from the billions of dollars being spent to prevent foreclosures.

Marketplace's Nancy Marshall Genzer has more.

Nancy Marshall Genzer: Neil Barofsky doesn't mince words.

Neil Barofsky: I think we've fallen far short so far.

Barofsky is the Treasury Department's independent watchdog on the financial bailout. Today, he told Congress that Treasury's $50 billion program to help homeowners avoid foreclosure, isn't working.

Barofsky: And any claims of success just aren't credible, and I think that there's growing suspicion that this is a failed program.

The Treasury Department says it hopes to help at least three million homeowners over the next two years. But Barofsky says, so far, only about 165,000 have been kept out of foreclosure. And Barofsky was only talking about part of what Treasury is doing to shore up the housing market. The government has also given more than $100 billion to mortgage giants Fannie Mae and Freddie Mac to make good on failed mortgages. Is all this money well spent? David Resler says no. He's chief U.S. economist at Nomura Securities. He says the government hasn't stabilized the housing market enough.

David Resler: There's a lot of uncertainty about whether house prices have hit bottom or not. You don't want to be buying if you think that housing prices are going down in the next couple of years.

But Karen Petrou of Federal Financial Analytics says we did get our money's worth. The housing market is a lot healthier than it was a few years ago, and it would be impossible to heal the market completely.

Karen Petrou: The federal government cannot kiss the mortgage market's boo boo and make it better.

But Petrou says, while the money may have been spent wisely, it's now time for the government to get out of the housing business and slowly hand it back to the private sector.

In Washington, I'm Nancy Marshall Genzer for Marketplace.

About the author

Nancy Marshall-Genzer is a senior reporter for Marketplace based in Washington, D.C. covering daily news.
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I agree that the Banks have not doen their share, as shown by Bank of america being sued in arizona, and seattle washinton. After jumping through hoops for a year and 6 months on their trial payment period, they sent me a letter saying I am not qualified. This is after I awas told verbally that in May I was aprroved by fannie may. As long as no one is going to come down on the banks they will do as they please

Barofsky's report on the housing bailout, at least the excerpts you quoted, apply rather well to this administration's economic policies as a whole: "Any claims of success just aren't credible, and ... this is a failed program." Except that this isn't a "growing suspicion," it's something anyone with sense has known since the programs started.

Having worked with hundreds of clients as a default counselor, it is ludicrous to pat the backs of any of the major lenders, including the GSE's.
I get hung up on every day by BofA, transferred to dead lines by Chase, and receive trial modifications for clients by WF, only to get denied permanent modifications 10 months down the road. From young couple to senior citizen, the banks have their clients writing hardship letters and turning in packets only for the banks to lose the information, ask for the same information 4-5 times, all the while leading on the borrower only to deny them help down the road, setting the borrower up for failure. The entire program is a big, ugly joke.

don't worry, Matt, Fannie and Freddie have been paying 10% interest on their combined 145 billion taxpayer funded infusion. What would you think, though, if you found out that this 10% rate may actually be a contributing factor to the need for future draws of taxpayer money?

The two GSEs have done the most to stabilize the economy, and have received the worst terms for assistance. Don't be surprised (or at least upset) if the rate it reduced. 3% of 145busd is still ~4 billion a qtr, in interest alone.

The only way taxpayer money is lost on the GSEs is if they are not allowed to pay it back. And considering the fact that they are essentially a duopoly, and will be for at least the next year(or two.), it's hard to see how they could not earn their way out.

Considering how broken the banks are in terms of actually helping customers, and how many people were simply too far over their heads for recovery, I would say 165K averted foreclosures is actually a strong accomplishment.

The bigger concern is the money given to Fannie and Freddie. I hope that will be held accountable for every penny.

I had been working with Bk of A since 1-08, to find a solution to our financial crisis of my husband losing his job of 39 years and my being disabled at age 53. His manufacturing job was being sent to a foreign country. We qualified for every program available to save homes from foreclosure/sale.In all that time, the bank could not move the paperwork along to finish a modification to save my home from foreclosure. We have a secure, constant income of social security, a pension, my disablity and my husband's part time job salary, but not enough to make the large payment we had. If the bank had talked to us just once, we could have worked out an agreeable modification for both parties and we would have been making our payments long ago and not moving out of our home on 8/30/10. We are hard working people, who always paid their bills on time, until we ran into job loss, huge medical bills and a pummelating economy. I don't know where we are going to go. That house represented a large portion of our retirement and was remodeled to accomodate my disablities. What does Bk of A want with a small 30 year house in an over 55 community? I believe there is more profit in foreclosure, than saving peoples homes. Thank You

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