Waldman crystalized a lot of the thinking with these observations during a lengthy recap of his meeting. I’ll add some emphasis to break up the quote a bit:
The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.
That prompted blogger Atrios (who tells me he was invited but didn’t feel like going; he had attended an earlier session) to take the next step:
Conning homeowners by announcing a government program designed to help them when in fact it was designed to help the banksters is, in my world, “cruel.”
This swayed Salmon to some degree.
Once they’ve been denied a permanent modification, homeowners owe the amount they were discounted during the trial. Banks often demand that the entire amount be paid as a lump sum right away or over a short period of time, causing a homeowner’s payments to swell beyond the original monthly payment.
What’s more, homeowners’ credit scores are damaged because trial payments are reported to credit agencies as delinquent or as part of a payment plan.
“Being in a trial modification if you don’t get a permanent modification is worse than having not been in a trial modification. Period,” said Diane Thompson, an attorney with the National Consumer Law Center. Worse yet, people “may have a hard time finding alternative housing because some renters check credit scores,” she said.
So, a debate over a complicated matter is sharpened, for me, anyway. Not to overstate anything: the world didn’t change because of the meetings. There’s no evidence the bloggers—via the meeting or their blogs—had any influence whatever, for instance, on HAMP policy.
Konczal (Rortybomb, if you’re keeping score) and others reported that Treasury officials feel the matter to have been handled and closed.
They are sticking by HAMP. The narrative seemed to change from helping homeowners to spacing out the foreclosures. I asked them to repeat it, because the idea that billions of taxpayer dollars are being spent to smooth out foreclosures for banks struck me as new narrative – it’s explicitly extend-and-pretend, and also fairly cynical.
There are, for sure, lots of pitfalls in these close encounters between commentators and the powerful. These might even spur bloggers to be overly tough, even on an unconscious level, in response to a feeling they’re being sucked into the game.
But there is at least one upside to hashing things out in person: it can move a reporter from being pretty sure to stone-cold certain, and that’s the best place to be.