Treasury Enters its Lame Duck Phase

A welcome sign of independent intelligent life at the NYT business section comes this morning, with Edmund Andrews’ piece on Frannie’s latest loan-mod plan. Both the WSJ and the FT played the story just as Treasury and FHFA wanted them to; the WSJ even sent out a "news alert" yesterday morning telling readers that a "mass loan modification plan" was on its way.

The WSJ headline is "U.S. Steps Up Help for Homeowners", while the FT opts for "New help for Fannie and Freddie borrowers". Here, by contrast, is Andrews, under the headline "White House Scales Back a Mortgage Relief Plan":

WASHINGTON — The Bush administration is backing away from proposals to have the government refinance a broad swath of homeowners who face foreclosure after taking out subprime mortgages and other high-risk loans over the last few years.

The clearest sign of retreat came on Tuesday, when administration officials announced a much more limited plan to help people who have become seriously delinquent on conventional loans guaranteed by Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies.

The plan announced on Tuesday could lead to lower monthly payments for several hundred thousand homeowners, according to officials. But it would have virtually no impact on the millions of people who took out expensive subprime loans and who are at the heart of the nation’s foreclosure crisis.

I think the Andrews slant is much closer to reality than the truth-but-not-the-whole-truth way in which the WSJ and FT decided to go. Clearly there was a huge fight with Sheila Bair, and equally clearly she lost — while, presumably, holding out hope for something much more substantial under the coming Obama administration.

There does indeed seem to have been a visible change in Treasury policy since the election. Until that point, it cared a little about optics. Now, it’s giving monster bailouts to the likes of AIG and American Express; it’s dragging its feet on homeowner relief; and in general Hank Paulson’s Wall Street buddies seem to be getting much better access than anybody in Detroit. And no one’s even trying very hard to defend these actions in public: they know they’ll be out of a job in January anyway, so they’re just doing what they want to do and what they feel is right, without caring much whether anybody else agrees with them.

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