Quote:
Originally Posted by Tyrone Slothrop
It's a little worse that that. As I recall, the bailout was structured to give relief to Main Street as well as Wall Street, but Geithner (in particular) didn't want to do that, and didn't use the tools Congress gave him.
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It was initially supposed to create bad banks to soak up and modify bad loans, but that was nixed (don't know who was responsible there). Then there was supposed to be a ton of money allocated to mortgage modifications. That was a fucking joke. The lenders set up new servicers to milk that (Wells Fargo most luridly, and perhaps criminally). They actually made money off the modification system while making it near impossible for borrowers to get modifications. There are a couple really amazing studies on it.
I believe Geithner was a big fan of citing moral hazard (the little people can't be taught they can be bailed out... that only applies to the TBTF clowd). He was also a proponent of the argument that the little guy wasn't as good a risk, while the banks would surely pay back Uncle Sam at profit. Nevermind that by bailing out the little guy with direct subsidies (same way Bush gave everyone checks during a bad economy a few years prior, only much bigger), Wall Street would have been the ultimate recipient of a lot of the funds.
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