An excerpt from an article in the MND:

While great efforts must be taken to avoid a future crisis and bailout the SIGTARP says, we cannot lose sight of the current TARP bailout.  Wall Street may have recovered but Main Street has not.  TARP was always intended as a bailout of the financial system to protect American families.  Business and homeowners are still feeling the effect of the crisis and still need help from TARP.

“In its March 2013 TARP report, Treasury writes, ‘Thanks to TARP…struggling homeowners have seen relief, and credit is more available to consumers and small businesses. ‘”  SIGTARP says of this, “Lost in this statement is the unfortunate reality that this improvement is only a fraction of what TARP could and should have done, and in many ways still can do.”

As of March 31, Treasury had spent less than 2 percent ($7.3 billion) of TARP funds on homeowner relief programs including HAMP and the Hardest Hit Funds while spending 75 percent to rescue financial institutions.  “Treasury pulled out all the stops for the largest financial institutions, and it must do the same for homeowners.”

Treasury also has a responsibility to insure the help it does provide is sustainable.

In order to avoid foreclosure through HAMP a homeowner must remain active in a permanent mortgage modification and only 862,279 homeowners are in one, about half of which were funded with TARP money. 

Now many homeowners are defaulting on these modifications, more than 312,000 to date.  SIGTARP is concerned that these defaults are increasing at an alarming rate.  As of March 31 the oldest modifications, done in Q3 and 4 of 2009, are defaulting at respective rates of 46.1 and 39.1 percent.

The report says Treasury should work to curb redefaults, which often inflict great harm on already struggling homeowners when any amounts previously modified suddenly come due.  SIGTARP recommended this month that Treasury conduct research to better understand the causes of redefaults and work with servicers to develop an early warning system so they can intervene before problems occur.

As regards Wall Street, the report says too big to fail is not just about size, it is about the interconnections the largest financial firms have to each other and to American households. 

Regulators were shocked, in 2008, to find how these large institutions were tied to each other and to counterparties so that if one went down it pulled other down with it.  Even the institutions themselves did not realize the extent to which they were linked.  Nor did they realize their exposures to short-term funding counterparties which, as Treasury Secretary Geithner said, “can flee in a heartbeat”, bringing the system down.  While the financial system is more stable now, ending too big to fail is critical to its safety. 


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