Remember when a little ol’ homeowner bailout set off CNBC’s Rick Santelli, igniting the Tea Party movement back in February 2009?
Back then the bailout number bandied about was $275 billion, enough to give $5,500 to every mortgage holder in the country or to write down $55,000 for 5 million of them.
How much money has the government actually spent bailing out those “losers,” as Santelli called them, nearly two years later?
Six hundred million bucks.
Remember, of the $750 billion TARP money, a token $50 billion of it was allotted to helping out non-bankers (which was beyond the pale for folks like Santelli). That was through the Home Affordable Refinance Program, which itself, neatly enough, worked by giving the banks money if they deigned to refinance underwater borrowers. Oh, the ironies.
ProPublica’s Paul Kiel flags the $600 million number and finds out which bankers got the money through a Freedom of Information Act request.
The largest payout, $79 million, has gone to JPMorgan Chase. Next on the list is Bank of America with $45.1 million. That’s a drop in the bucket for BofA, which reported net servicing income of $780 million in the third quarter.
HAMP is a near total failure, one whose primary result has been to “allow unhealthy banks to appear healthy, staving off costly bank failures,” as The Huffington Post wrote in August. Funny how that works.
There are two main reasons why so little money has been paid out. First, there have been few modifications done through the program. The government only pays incentives for finalized modifications, not trials. For instance, even though $8.3 billion has been set aside for Bank of America, it won’t get that money unless it provides modifications.
Second, incentives are paid out over time. For instance, homeowners in the program receive a $1,000 reduction to their mortgage each year for five years if they stay current on the modified loan. The program is less than two years old, and few modifications were given during the first year.
Now, some would say it’s better that the government’s not actually going to spend the money, which it shouldn’t have allotted in the first place. That’s a legitimate debate. But meanwhile, it’s strung along hundreds of thousands of people in the process and helped delay the process of the housing market finding a bottom.
It’s helped almost very few who needed it and triggered a political movement that resulted in historic losses for Obama’s party in the midterm elections.
Heckuva job!
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.