I can’t believe the administration – especially Tim Geithner – is still trying to excuse their ineptitude on the housing crisis. I mean, we’ve read the books from administration insiders like Sheila Bair and Neal Barofsky since they’ve left, and they complain about the same thing: Tim Geithner’s fixation on helping the banks instead at the expense of homeowners, and Obama’s acquiescence to Geithner’s choice. Until it’s acknowledged that this was the wrong decision, I don’t have much faith in the ones they’re going to make now:
One year and one month before President Obama won reelection, he invited seven of the world’s top economists into a private meeting in the Oval Office for their advice on what do to fix an ailing economy. “I’m not asking you to consider the political feasibility of things,” he told them in the previously unreported meeting.
There was a former Federal Reserve vice chairman, a Nobel laureate, one of the world’s foremost experts on financial crises and the chief economist of the International Monetary Fund , among others. Nearly to a tee, they said Obama should introduce a much bigger plan to forgive part of the mortgage debt owed by millions of homeowners underwater on their properties.
Obama was reserved in response, but Treasury Secretary Timothy F. Geithner interjected that he didn’t think anything of such ambition was possible. “How do we get this done through Congress?” he asked. “What could we actually do that we haven’t done?”
The meeting highlighted what today is the biggest disagreement between some of the world’s top economists and the Obama administration. The economists say the president could have significantly accelerated the slow economic recovery if he had better addressed the overhang of mortgage debt left burdening Americans when housing prices collapsed. Obama’s advisers say that they did all they could on the housing front and that other factors better explain why the recovery has been slow.
The question is relevant because though Obama won a victory earlier this month, the vast majority of voters still say the economy is weak and not getting better. Policymakers in Washington are now focused on another type of debt — the public debt owed by all taxpayers — but the slow economic recovery, which depresses tax revenue, makes that problem harder to solve.
[...] “Housing was the neglected piece. They have the kind of attitude that they don’t believe this is a good value for the money, this is politically unpopular, and there’s not much we can do,” said Alan Blinder, a former Fed vice chairman consulted frequently by the White House. “There were obvious things to do that academics and others started pointing out back in 2008. That could have shortened the recovery time.”
Obama’s economic advisers dispute that notion. Geithner said the administration chose the best of the feasible options to deal with the housing crisis.
“We knew the hit to wealth would be damaging. We knew the level of debt had the potential to restrain the strength of recovery,” Geithner said in an interview. “The only issue was, what could you do about it? What were the feasible options available?”