Missing from the bailout: the trickle-down

A three-member Congressional Oversight Panel has scheduled hearings to look at what L.A. Land commenters have been asking for months: Where's the bailout for the little guy? First stop, Las Vegas. From today's L.A. Times: 

In this hard-hit corner of the nation's mortgage meltdown and credit crisis, it's hard to find anybody who sees evidence that the Treasury Department's $700-billion rescue plan is working after two months.

... Economists, local bankers, beleaguered homeowners and government officials said here Tuesday that the billions of dollars paid out by Washington to the banking industry were not filtering down and that Nevada's desperate condition was growing worse.

On the panel are Chairwoman Elizabeth Warren, a Harvard University law professor; Government Accountability Office and Treasury Department Inspector General Eric Thorson and Democrat Harry Reid of Nevada, the Senate majority leader. Despite receiving more of the first $350 billion, major banks have not increased lending, Reid said.

In a later interview, Warren said the Treasury Department should have a lot of leverage to compel banks to do more, given that taxpayers have handed over billions of dollars and in many cases are now shareholders.

And who can compel the Treasury Department? From Tuesday's Wall St. Journal:

House Speaker Nancy Pelosi suggested Monday that Congress will force the Treasury Department to do more to help struggling homeowners if the administration seeks access to the second half of its $700-billion financial-rescue fund.

Ms. Pelosi's comments reflect frustrations of lawmakers from both parties who feel Treasury Secretary Henry Paulson has not spent the funds the way Congress intended. Specifically, they say the Troubled Asset Relief Program, or TARP, hasn't been used to directly aid homeowners having trouble paying their mortgages.

Instead, the article concludes, TARP "has become increasingly entangled" in the auto industry bailout.

-- Lauren Beale

Comments? Thoughts?

Photo: House Speaker Nancy Pelosi of Califorinia speaks during a news conference Monday on Capitol Hill. Credit: Associated Press 

Comments

[Tim K.]

This is why this bailout was badly conceived in the first place. Nobody wants to make any more bad loans. And essentially, lending ANYONE money to buy an overpriced home is a risky gamble because the home is over valued and will drop in price.

The banks know this, and that's why they aren't making as many loans. For home that are properly priced AND have buyers who will likely repay the loan, these loans exist. So there is no "lending problem."

The banks are acting smart in their own self-preservation. If I were in their position, I would take any and all money thrown my way and stash it away in safe treasury bills, which is *exactly* what they are doing, which is why treasury bills are yielding essentially 0% now.

The answer to economic normalcy is simple - lower home prices. The market is doing that already; just step back and let it do its work!

[Jack Badlander]

Here's a shock. After 28 years someone noticed that "Reaganomics" doesn't work.

This just in, the world is round, the sky is blue, and the rich get richer.

I'll get back to boiling my shoe for dinner now.

[Laker]

That is not exactly correct.
Couple days ago, I received my personal portion of the TARP in the form of invitation from WAMU (aka chase) to open a new checking account and get $100 for free (just for opening the account).
No doubt, that this $100 is coming from the TARP money...

On another note, I think Tim said it exactly as it is. 100% correct: "...lending ANYONE money to buy an overpriced home is a risky gamble because the home is over valued and will drop in price...."

[MyLessThanPrimeBeef]

Not only does Reaganomics not work, niether does globalization.

We need biodiversity so that one species-specific disease does not wipe out humanity's food supply.

We also need economic diversity so that one financial crisis does not wipe out the world economy.

Think of a compartmentalized Titanic - one rupture of the hull shouldn't sink the whole ship. The damage is localized and thus neutralized.

Imagine if we have a lot of different Cuba's in the world with some but not a lot of international trade. In that world, one subprime mortgage problem does not propagate to another part in that world.

[LA-renter]

Being one of the few print subscribers, I read this LAT piece over breakfast.

A Nevada official said: "Our economy has gone from the fastest-growing in the nation to among the worst."

The fact that Las Vegas, NV was the biggest thing in America in the past decade says it all about our present predicament.

[Rick Jensen]

Barack Obama and the Democratic Party are beholden to the financial industry. Due to their contributions to his campaign and being surrounded by bankers like Penny Pritzker, Obama's national finance chairman whose bank went bankrupt due to subprime loans, Obama and the Democrats owe the executives, not the voters.

Rick Jensen
Rick Jensen Show
1150 AM WDEL / www.WDEL.Com

[ryanman]

The only way Congress get their legislation right is when they go slow and careful. The first bill was a rush job. The second was a rush job tacked to a bunch of pork. It's curious to think what if the bailout hadn't passed. The Congress has made 3 recent terrible decision as rush jobs, the Patriot act, invading Iraq, and this bailout.