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Yet Again, Beltway Pundits are Wrong and the Tea Party is Right

The Tea Party correctly identified problems in the mortgage market two years ago, even as the Washington establishment is still struggling to understand.

3:15 PM, Mar 6, 2011 • By MARK HEMINGWAY
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Of course, as Stephen Spruiell noted at National Review, principled liberals such as Dayen weren't really vocal about their belief the program was a failure until late last summer when it became too obvious to ignore. So if HAMP isn't actually helping out the little guy, who benefited from the government funneling an additional $50 billion into the mortgage industry? Here's National Review's editorial from way back in February 2009 when the program was announced:

Put simply, this program is designed to benefit Fannie and Freddie shareholders, not the great majority of Americans struggling with their mortgages. The only loans that can be restructured are those held in Fannie/Freddie portfolios or securitized by the twins. Just in time to benefit from a refinancing boom, Fannie and Freddie plan to raise their fees to as high as 3.5 percent on April 1. (Note that date, taxpayers, and ask yourselves who is being played for the fool.) And only a tiny slice of homeowners will be eligible — those who are in relatively weak positions (house payments exceed 31 percent of gross income) but not too weak (house payments do not exceed 38 percent of gross income) and who are, despite their mortgage difficulties, still creditworthy enough to pass bank underwriting standards. Fannie and Freddie get new capital, new income, and better loans in their portfolios. Most homeowners get nothing, and taxpayers get the bill. Fannie and Freddie, which ought to be disbanded, will survive to continue distorting both markets and politics.

HAMP was always a GSE/bank bailout disguised a consumer protection program. Talk about insidious. The only reason the Obama administration got away with this fraud is because the Lords of Beltway Conventional Wisdom have been snookered into credulously believing the White House had good intentions at every turn. If Milbank's column is any indication, they're holding fast to this belief even as principaled liberal observers are in agreement with the right on this narrow issue.

Further, the problem is more complex than the big mortgage banks vs. the American people. You'll recall that Rick Santelli's famous CNBC rant that set the Tea Party in motion was about HAMP. Specifically, Santelli was angry over the idea that the government was going to just bail people out of their mortgages without making any effort to distinguish between those Americans that were genuinely victims of deceitful mortgage practices or those that were  simply greedy and made bad investments.

"This is America! How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills? Raise their hand," Santelli said. And with that, a political movement was launched.

In fact, just about the only people that have from the beginning opposed the bank bailouts, weren't fooled by HAMP and correctly identified the problems of government distorting incentives in the mortgage markets were Tea Partiers.

Thankfully, some principled people on the left -- such as Dayen quoted above -- are coming around on HAMP and mortgage markets. They might still talk up Elizabeth Warren's Consumer FInancial Protection Bureau and other dubious government panaceas to a problem largely created by government in the first place. But that is at least an understandable point of disagreement.

Supporting HAMP is at this point is as inexplicable as it is indefensible. And Milbank's suggestion that Republicans aren't protecting consumers by wanting to kill HAMP is grossly unfair. He really ought to know better.

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