When the Bush Administration refused to take responsibility for its actions before, during and after Hurricane Katrina, the talking point to the media was that they were not going to play the “blame game.” Now, it appears the Obama administration, noting how well his predecessor was at media management, is attempting a ‘shame game’ whereby the White House will use its pulpit to put pressure on lenders to significantly improve their loan modification process and keep more Americans in their homes, or be ‘called out’ for not doing so. The Obama administration put $75 billion or so of taxpayer money into the program and yet red tape and inefficiencies plague the program’s effectiveness.
According to a recent New York Times article [http://www.nytimes.com/2009/11/29/business/economy/29modify.html?hp] Michael S. Barr, Treasury’s assistant secretary for financial institutions said in an interview, “The banks are not doing a good enough job,” and “Some of the firms ought to be embarrassed, and they will be.” The article claimed that Mr. Barr said the government would try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments. The Treasury Department also will wait until reductions are permanent before paying cash incentives that it promised to mortgage companies that lower loan payments. Reported the times, “They’re not getting a penny from the federal government until they move forward,” Mr. Barr said.
For those in need, and for the economy as a whole, we’re hopeful the ‘shame game’ will work, keep people in their homes, get distressed assets off the books of mortgage providers and get them lending again and help maintain the real state recovery which will ultimately lead to a full economic recovery.