SIGTARP: HAMP Servicing Abuses Led to Unwarranted Foreclosures
The latest SIGTARP (Special Inspector General of the Troubled Asset Relief Program) report is, if such a thing is possible, even more damning than its previous quarterly reports. It slams the Treasury for abject failure to meet the program’s own objectives, its lack of proper control and metrics, its “Mission Accomplished” declarations, its phony accounting, particularly with regard to AIG, and its abject failure on loan modifications (note one of TARP goals was to preserve homeownership. The Economic Populist has a good summary of the report.
It’s distressing to see that this account, which is unusually forthright in its criticism because the performance of the TARP is so terrible, get short shrift in the MSM and even in the blogosphere. Unfortunately, this suggests that Team Obama is proving Jospeh Goebbels to have been correct: tell a big enough lie and keep repeating it, and the public will eventually come to believe it. And the lie is the one the Administration has been hawking for some time, that TARP was a success. The big reason is that they’ve sold the canard that the TARP was profitable. First, that is counting chickens long before they are hatched; in particular, as SIGTARP points out, the Treasury claims on AIG are a whooper, and there is also $80 billion in funds committed that might still be deployed.
The Administration has also gotten awfully creative in its accounting for AIG. In its last report, it anticipated losses of $45 billion, which have miraculously shrunken to $5 billion. How did such a happy turn of evens come about? Due to a change in methodology. Keep in mind that other official bodies tasked to estimate losses on AIG come up figures much more in line with the Treasury’s old figure. And the Treasury has included a $2 billion credit line as part of its proposed AIG resturcturing, which seems a bizarrely small amount. One time insurance analyst (and successful AIG short) John Hempton says the $2 billion really is a statement that AIG is being supported. [Update: Hempton was short, but in comments says he made “next to no money” but friends of his did better].