What Was not Done in Addressing the Foreclosure Crisis?

After the passage of a year since the handing over the reins to President Obama many are having second thoughts about his strategy and what was not done in addressing the foreclosure crisis.

Many opine that he tried to over reach and do much beyond limits. Especially he should have kept health care problems on one side and focused more on the economy. But many others disagree on this.

The new government’s troubles emanated not from over ambition but of wrong judgments in matters related to policy and politics. The stimulus was inadequate. The policy towards the banks was weak. Reagan faced the same economic problems when he came to be president but unlike him Obama did not shield himself from criticism by focusing on the shortcomings of his predecessor.

The stimulus funds did definitely help and without it the unemployment figure would have been much higher than what it currently reads. But the plan of the government was not big enough to make noticeable jobs gains in 2009. Many economists had pressed for a bigger stimulus but his top advisers told him in December 2008 that it was not necessary economically; neither would it have been politically wise to spend more on stimulus funds.

The political decision may or may not have been right but their economic one was definitely wrong. However the focus was correct and the government was not distracted but it just went awry.

As regards the banks many had advised against taking a tougher stand towards the banks. They argued that the financial houses were earning and working their way back to health. But the weak attitude towards the entities that had perpetrated the financial crisis gave them more indulgence to go on behaving like spoilt children. They did very little in the way of enhancing lending. They have been bringing down rather than increasing their loan balances. This has had left behind disaster on the political trail. The administration is now facing public anger over the twin issues – bailouts and bonuses.

Many have forgotten that during the Regan era unemployment actually and surprisingly shot up after tax cuts. But Reagan never failed to talk back to his critics – he laid all the blame on the previous government. Reagan spent some of the initial years of his office running down Jimmy Carter. Obama could have copied him – and with more truth in the accusations because there is no two opinion that the Bush government failed to regulate the banks. But he did not because of his dreams of bridging the gap between the two parties.