5106

IIRC, the Treasury Department bought mortgages from banks and eventually sold them off. They also lent money to troubled banks, eventually recovering it with interest. They weren’t giving anything to the banks for free, in fact Treasury turned a small nominal profit.

However, in addition to all these purchases there was also a smaller program that outright subsidized the mortgages of homeowners facing foreclosure.

5107

That’s the problem with Bernie, and to a lesser extent Warren, they have a lot of shitty idea, and huge amount of arrogance that they know better than folks like Paulson, Geitner and Summer who have been doing this stuff their entire career.

First of all it is lie to say that bailout funds only went to the banks. There were many programs for consumers. First, Freddie and Fannie relaxed many guidelines to allow people to refinance. More importantly they provide an alphabet soup of programs (The latest being HARP, which just expired 12/31/2018) in tens of billion in taxpayer subsidies to allow underwater homeowners to keep their houses. This required the government and banks both to take a loss. So if they homeowner had mortgage of $200,000 and the house was only worth $175K they let the home owner at $175k and they eat the loss.

Next, Congress reversed a many decades old law that treated forgiven debts as income, but only for homeowners. Normally, if you borrow $100K, pay back $50K and then convince the other party to forgive the $50K. The IRS treats the forgiven debt as income. (That’s one of many reason Trump is almost certainly guilty of tax evasion). This allowed million of home owners (and only homeowners) to walk away from their house, without owing additional taxes, and cost tax payers tens of billions.

Finally, lets not forget the most important thing. TARP and other programs worked they kept the economy from going into a depression. Not only that but the Treasury made $15 billion in profit from the program. When was the last government program that made a profit?

5108

Two days late, I know, but I think it’s a Fallout reference.

5109

Nope, just a regional name for the Washington-Oregon-California region. Called such because the Cascade range.

5110

Who were also saying everything was fine before the collapse and still think they were right about a financial free-for-all.
I’m also pretty sure bailing them out is only a problem for libertarians. And also that Kelton has filled them out on whatever they didn’t know about how banks work and how you’re back on the same path of keeping it running on perilous private debt.

5111

(Edit: Oops, replied before reading @Perky_Goth’s response.)

Except you know these are the same type of people who lobbied and encouraged gov’t deregulation, kneecapping the SEC and cheerleading the Wall Street behaviors that led to the crash to begin with. None of the bad actors faced any kind of consequences for their actions, in fact many ended up with bonuses. And all those programs you listed barely dented the private debt overhang which many economists have argued contributed to the languid recovery.

So your “shit” ideas that you lodge against Warren can be mirrored right back at the plutocrats who continue to insist they’re the smartest people in the room. Yes, Paulson et al did save us from the brink and they do deserve credit for that, but asserting their approach was the only way forward is typical myopic thinking from those vested in the status quo.

5112

There were tens of millions of bad actors, in the financial meltdown, including myself for failing to really understand some of the financial products I bought and ignore risk. But most important the tens of million of American who took out mortgages other loans, and knowingly fill out false information, despite the warning in big red letters that says “I certify under penalty of perjury that everything in this loan application is accurate.” The hundreds of thousands of mortgage broker and real estate broker who pushed them. Their boss, the stupid/incompetent and some case corrupt loan officers. Thousand of bank executives. Two federal agencies and Congress, rating agencies… And of course, numerous greedy and/or incompetent Wall St executives and banker in the US and throughout the world. We need to double our prison to jail all the criminals responsible.
So which Warren or Bernie program will help with debt overhang? The program the forgives all student debt, or the one that make college free. The one that spends $35 trilllion to provide Medicare for all. The Green New deal? If debt overhang is problem, and I agree with the article it is. Please tell me what’s their plan to fix it?

It seems to me that virtually every one of Bernie and Elizabeth’s programs make US and global debt worse not better.

I’m most familiar with the health care plans so let me pick on those… Thursday, Bernie rallied against the insurance companies, he pointed out that we spend twice as much on health care as every other country. He then went on to scream that insurance companies make $23 billion (I’ve sanity checked the number he is in the right ball park +/- 30% ) Elizabeth has also tossed out number $30 billion profits for insurance companies, $50 billion for some one else, and two debates ago she said that combined profits for Pharma+ Insurance was $100 billion. I think her number is high, but in the ballpark.

But they never talk about the context. We spend 3.4 tillion/year on health care in this country. The $23 billlion for insurance company profit is less than 1%.Bernie wants to blow up the system to save under penny on the dollar, that’d crazy. Even accepting Warrens $100 billion profit number, We are talking less than 3%. 80% of hospital and the majority of insurance in this country are Not For Profit. It is one giant lie to say I can bring down the cost of health care in the country by eliminating profits. The just isn’t enough profit (in a traditional sense) to make a difference.

5113

HAMP put the mortgage lender or servicer in control of the process. Since they had no incentive to help the homeowner, they quite famously slow-rolled the process and as a result relatively few homeowners made it through the process. Those that did were rewarded with interest rate reductions and / or payment schedule changes, not by having their actual mortgage balance reduced or eliminated.

Servicers reject more than a fifth of borrower applications for paperwork reasons – often due to lost paperwork by the servicer itself. An October, 2010 ProPublica survey found that homeowners seeking modifications had to send the same documents an average of six times before they were received. If the paperwork hurdle is passed, servicer bureaucracy results in substantial delays in determining eligibility. Servicers often reject modifications if they decide the borrower isn’t in enough financial trouble. When they do grant modifications, they rarely reduce the total debt burden of the consumer. Instead, modifications generally cut interest rates temporarily and reschedule payments.

While borrowers wait for the servicer to determine eligibility, the foreclosure divisions of the same servicer often continue the foreclosure process, sometimes leading to borrowers getting foreclosure notices from the same servicers with whom they are negotiating a modification. Although servicers are technically required to follow extensive government guidelines, the federal government does not levy fines or penalties for violations.

There was an alternative program model at the time, the model used when the FDIC took over IndyMac Bank in 2007:

Indeed, a program that inspired HAMP shows how government could have sidestepped servicer issues to directly assist homeowners. When the Federal Deposit Insurance Corporation (FDIC) took over the failed IndyMac bank in 2007, it inherited a large portfolio of troubled loans. The FDIC simply analyzed the entire loan portfolio to see if a loan modification would save money compared to leaving the loan unmodified and risking foreclosure. If a modification appeared economically rational, the FDIC approached the borrower and directly offered the modification. If the borrower accepted, the modification was done. While this program wasn’t perfect, it ran comparatively smoothly and avoided the massive paperwork problems experienced in HAMP.

5114

In most consumer loan transactions, there are two parties. One is an expert on the borrower’s finances and prospects, on the viability of the loan for the borrower, and on the risk associated with the loan. The other is the borrower. The experts preyed on the rubes. You can blame the rubes if you like, but usually only one of the two parties is engaging in unscrupulous behavior, and it probably isn’t the borrower.

You’re ignoring service provider profit. Most health care spending goes to service providers. There is a reason some doctors don’t want to take Medicare patients: Medicare effectively regulates their rates and, therefore, their profit. MFA would presumably do the same. One only has to look at health care spending per capita in the US vs. the EU to understand there is a lot of room to bring down health care costs.

5115

Medicare and Medicaid do not cover costs. Just look at the rural health systems that are shutting down, unable to continue operating, shutting their doors making their previous patients travel sometimes hundreds of miles to find another hospital. It’s not just about profits; it’s about survival. Those insurance products do not cover costs, and the systems that rely on s payor mix where they’re too heavy on the government plans tend not stick around.

5116

What about the issue that the costs themselves, the amounts charged by doctors, sub-providers, medical equipment makers, and so on, are all vastly inflated relatively to other developed countries? How do we push back on that? There’s a pretty strong argument that regardless of whether we do a Medicare Buy In or a Medicare For All type proposal we need strong reform of medical pricing, not just at the “retail” level but at every level of the system. Inelastic demand breaks the normal feedback loop on price on multiple levels in health care and our last 50 years of trying to force the market to work in health care despite inelastic demand, has resulted in prices at every tier that are roughly double what other other developed countries have achieved. We need price pushback, hard, and soon, and all throughout the system.

Note: I don’t actually expect medical prices to ever fall relative to inflation or to ever go down to European levels due to path dependency and sunk costs. But I do believe we can hold the future growth of medical prices to the range of inflation, as many other countries have done that, but it requires strong government intervention on price. Period.

5117

I’m not going to disagree that full forgiveness gives the wrong incentives to everyone, but you can do a lot of concealed forgiveness by changing length and interest, especially if you intend for inflation to hit the 2-3% target.
But you can also stop making it worse by making the cost of education being closer to the costs of educating, and by stopping people from only going to the doctor when they can’t work, which is significantly costlier.
The GND is also a distributed job guarantee (in useful and needed things that have been neglected for decades) to keep people in the workforce, not let communities degrade and up the pressure on precarious work. This should alleviate private debt as it gives security.
That and crippling regulations on excessive profits, such is life.

That’s public debt, and the direct effects on the economy are vastly overstated. Even if you don’t want to trust radical ideas, it’s clear a lot of countries would be bankrupt if monetarism was correct, and, well, the rational actors haven’t really been concerned, have they? At least if you can create more wealth, whatever that means, than you spend, there should not be an issue.

5118

This program was far smaller in scale than what was contemplated for HAMP. It only resulted in about 30,000 loan modifications, and was also the subject of consumer complaints over paperwork and other issues.

No doubt HAMP could have done better, but I’m not sure massively scaling up a DIY approach would have worked.

5119

I agree costs are a consideration and bringing them down would help a lot, but anyone who thinks some of these decisions are made just to make some doctor or executive rich has a poor understanding of what is actually going on. Health systems, hospital systems are closing doors, and some smaller facilities are not joining larger system just to maximize profits; some of them are joining larger systems because it’s that, or they’re going to close their doors. They don’t have the money to operate independently anymore. The payments are not there, and you can’t enslave providers. They still have a choice of where to work. Not everyone is out there making bank like the public or this maximize profit talk implicates.

5120

By themselves, price controls will simply lead to even longer waiting times for an appointment.

The only way to achieve costs like the rest of the world is to reduce demand to levels comparable to the rest of the world. Because for better or worse, Americans have far higher expectations from their medical providers than other health care consumers, and this directly leads to higher prices.

Just to give an example, if you have a family member who suffers a ruptured brain aneurysm, then you have about a 0.05% chance of suffering the same, unless it is detected and treated. This risk is viewed as unacceptable by American patients and doctors, so you will almost certainly be screened for brain aneurysm at a cost of around $1000. Even if this completely eliminated the risk of family history, the actual numbers saved are so small that it would not make a difference when comparing US mortality to other countries.

To take another example, my uncle recently passed away. He lived in the EU. Before he died, he was found to have numerous brain lesions. My cousin asked the doctor for a brain MRI. The doctor refused to order one. She admitted there was a chance it could show a treatable illness, but the chance was fairly low. She was right about the low likelihood of success, but her decision would be totally unacceptable in the US because here we don’t skimp if it might save a life. I asked my cousin whether she could send me a copy of the medical records or obtain a second opinion. She said that would be very difficult, because the doctor might get offended and refuse to release the records. Second opinions are literally a foreign concept.

Final example. Orthopedic surgeons are notorious for ordering spine MRIs for back pain, an expensive test which is proven to add little value. I once asked one why he ordered so many. He said, “Because if I don’t order it, the patient will leave and find a specialist who will.”

I don’t doubt that outcomes in the EU are statistically as good (or better) than ours and medical care costs less. But the attitude towards health care is much different, very deferential and not at all in keeping with the American patient-centric approach. And I really think the only way we can achieve the EU-level costs is with EU-like patient expectations.

Of note, US health care used to be far more paternalistic. We view that as the bad old days, but I think it’s no coincidence that costs were are also much lower.

5121

That, and it would also help if our corporate-friendly agricultural policy over the last 40 years hadn’t turned most of our adult population into walking excess calorie repositories, with all the health problems that entails.

5122

Magnet, citation needed X infinity.

5123

There are a few studies out there for this.

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There is also a reason that providers, even the open and honest ones have a hard time admitting… with access to previous medical records getting easier and not require literal paper, there is still this why should I trust what this other group, physician, technician did too.

That top one is almost uniquely heavy within the USA compared to other countries.

https://www.amjmed.com/article/S0002-9343(16)30680-5/fulltext

Two reasons for overuse — doctors who refer patients for scans at their own imaging facilities and doctors who order tests to protect against potential lawsuits — require broad solutions, Hendee said.

5124

It sounds like a circular argument. We spend too much for the outcomes we get, but we can’t spend less for the same outcomes because we spend too much for the outcomes we get.

US medical service providers have the highest rates of pay in the world. Pay them like their counterparts in the EU get paid, and costs will come down. And if the entire system is driven by MFA, there isn’t anywhere for them to run to to get better rates. And you can make it illegal for them to refuse Medicare. They can refuse, but only by giving up the practice of medicine. Hint: they will not do that.

5125

Well it would be if anyone at all actually made that argument; no one is.

We’ll increase shortages and not address the problem at all that way.