Wednesday, June 17, 2009

“Hank’s Choice”

Drew Voros writes for The Contra Costa Times Foreclosure waves fed by `Hank's Choice"

…While not matching the literal life-and-death nature of William Styron's novel, "Sophie's Choice,'' former Treasury Secretary Henry "Hank'' Paulsen made a choice, let's call it "Hank's Choice,'' last fall that is fueling foreclosures. Instead of deciding between two children, Hank had to choose between homeowners and the banking industry, in which he made his $700 million personal fortune running Wall Street's top bank, Goldman Sachs.

Days after convincing Congress and the American public to approve a record $787 billion bailout that would remove some $350 billion in toxic mortgage debt from our financial system, Hank switched gears faster than Jeff Gordon on Turn 2 of the Sonoma Speedway.

Hank called a news conference in October and said that removing toxic debt would be too difficult, that it would be better to give America's biggest banks, which had fed our financial meltdown with lax lending standards and incentive fees for low-grade borrowers, $25 billion each, no strings attached.

So began the federal government's plan to save the banking industry and hope homeowners could hang on. There would be no foreclosure prevention plans or loan modification incentives for banks, no plan to help homeowners of any stripe with a 4 percent, fixed-rate, federally issued mortgage that had been proposed. The new guy coming to the White House could take care of that, or not. It was his choice, despite the fact the money to make such programs happen was gone.

In forsaking homeowners — whether they be distressed, underwater, on time or paid off — in favor of his banking buddies, Paulsen set the current stage of worsening foreclosures, rising mortgage rates and pervasive deterioration of home values throughout America…

People are angry at Wall Street and Washington. Certainly, they were all complicit in creating the housing bubble…and they benefitted greatly from doing so. As home prices fall back to reality, banks, investors, and homeowners are suffering.

I would like to give Hank Paulsen the benefit of the doubt and believe that his intentions were good. I would like to believe that everything he said and did he honestly believed that it was in the best interests of the Country.

It’s human nature to want to blame someone else for our problems. Hank Paulsen makes an easy villain…just as Tim Geithner does now.

The truth is that the public was never told the whole truth about how bad things got, so as not to incite banks runs or riots. I can forgive Paulsen for this…he had no choice.

I do believe that Paulsen honestly believed that having a solvent banking system was more critical to a functioning economy than helping suffering homeowners. I don’t believe that he took actions that would harm his Country so he could give taxpayer money to his friends.

Maybe I’m naive.