Geithner To DeMarco: "I Do Not Believe [Un-Socialism] Is The Best Decision For The Country"

Tyler Durden's picture

In an administration that has completely lost its mind, and in which the solution to every problem is the forgiveness of debt to those who lived beyond their means, FHFA's Ed DeMarco is a lone voice of sanity. In a letter to Tim Geithner, the FHFA has the temerity to tell the truth and say that "after extensive analysis of the revised [Principal Reduction Act]...FHFA has concluded that the anticipated benefits do not outweigh the costs and risks... FHFA concluded that HAMP PRA did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today."Via Bloomberg:


Needless to say, when presented with a minority opinion that socialism just may not be the answer, Geithner was not happy and penned his own response. Both are presented below.


DeMarco To Geithner:



Today, I provided a response to numerous congressional inquiries as to whether the Federal Housing Finance Agency (FHFA) would direct Fannie Mae and Freddie Mac to implement the Home Affordable Modification Program Principal Reduction Alternative (HAMP PRA). After extensive analysis of the revised HAMP PRA, including the determination by the Treasury Department to begin using Troubled Asset Relief Program (TARP) monies to make incentive payments to Fannie Mae and Freddie Mac, FHFA has concluded that the anticipated benefits do not outweigh the costs and risks. Given our multiple responsibilities to conserve the assets of Fannie Mae and Freddie Mac, maximize assistance to homeowners to avoid foreclosures, and minimize the expense of such assistance to taxpayers, FHFA concluded that HAMP PRA did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today.


I have also previewed for Congress several housing-related initiatives to strengthen the loss mitigation and borrower assistance efforts of Fannie Mae and Freddie Mac as well as improve the operation of the housing finance market. These initiatives include new and consistent policies for lender representations and warranties, alignment and simplification of the Enterprise short sales programs, and further enhancements for borrowers looking to refinance their mortgages.


and Geithner's terse reply:

Letter from Secretary Geithner to Acting FHFA Director DeMarco on the Principal Reduction Alternative (PRA) Program
By: Anthony Reyes

Today, Secretary Geithner sent the following letter to Acting Federal Housing Finance Agency Director Ed DeMarco on the Principal Reduction Alternative (PRA) program. Read the full letter here:


July 31, 2012


Federal Housing Finance Agency

Office of the Director

400 7th Street S.W.

Washington, D.C. 20024



Dear Acting Director DeMarco,



I am writing in response to the decisions announced in your letter to Congress today.  While I was encouraged that the Federal Housing Finance Agency (FHFA) is making progress on some initiatives we have discussed that will help the housing market recover, I am concerned by your continued opposition to allowing Fannie Mae and Freddie Mac (GSEs) to use targeted principal reduction in their loan modification programs. 


FHFA is an independent federal agency, and I recognize that, as its Acting Director, you have the sole legal authority to make this decision.  However, I do not believe it is the best decision for the country, because, as we have discussed many times, the use of targeted principal reduction by the GSEs would provide much needed help to a significant number of troubled homeowners, help repair the nation’s housing market, and result in a net benefit to taxpayers.


Indeed, notwithstanding the selective numbers cited in your letter, FHFA’s own analysis, which you have shared with us previously, has shown that permitting the GSEs to participate in the Principal Reduction Alternative program (HAMP-PRA) could help up to half a million homeowners and result in savings to the GSEs of $3.6 billion compared to standard GSE loan modifications. Furthermore, if the GSEs were to participate in HAMP-PRA, taxpayers would save as much as $1 billion on a net basis.  In view of the clear benefits that the use of principal reduction by the GSEs would have for homeowners, the housing market, and taxpayers, I urge you to reconsider this decision.


I have asked Michael Stegman of my staff to restate in writing for you the case for principal reduction, consistent with FHFA’s mandates as conservator and regulator of the GSEs, that the Treasury has made to you and your staff over the last several months.  His memorandum is enclosed.  Treasury stands ready to provide any additional analytical support to make a targeted principal reduction program at the GSEs successful.


We welcome the positive steps you announced today regarding further refinancing opportunities, providing clarity to lenders on legal exposures, aligning short sale practices, and putting foreclosed properties back on the market.  All of these have the potential to help advance recovery of the housing market.  As we have previously discussed, the impact of these steps will depend on the speed with which you act and the extent of the changes you make.  


Five years into the housing crisis, millions of homeowners are still struggling to stay in their homes, and the legacy of the crisis continues to weigh on the market.  You have the power to help more struggling homeowners and heal the remaining damage from the housing crisis.  I hope you will move to address these problems with a sense of urgency and force commensurate with the scale of the remaining challenges. 




Timothy F. Geithner?

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ParkAveFlasher's picture

What can the man say, some pigs are just created more equal than others. 

See you guys around the fire drum!  I'll bring the harmonica.

nope-1004's picture

Geithners words:

Treasury stands ready to provide any additional analytical support to make a targeted principal reduction program at the GSEs successful.


Treasury stands ready to provide any BS the market will take, and I'll put my name to it since I am a bold faced liar.  Since I have no future and since the future of this Admin rests solely on lies, I will continue to tarnish my name to make a targeted principal reduction program at the GSEs successful.

Get lost Geithner, you first class loser.


TruthInSunshine's picture

Little Timmy Geithner, who is and always has been a bag boy for the best friends forever of the New York Branch of the Federal Reserve 'Bank,' was really hoping he could deliver this pre-election 'solid' to those TBTF friends. He must be livid.

What Timmmmmay was really hoping to accomplish was to get a political win couched in the language of "we're helping distressed homeowners," while providing even more taxpayer and deficit-derived funding of still troubled financial instititutions, who are directly (via holding much of that underwater MBS) or indirectly (via being exposed in a myriad of other ways to those that are holding much of that underwater MBS- can't get paid by the insolvent).

Here's just one line (of many) that was the sugar bribe in the making that Timmmmay was hoping would seal the deal:

"After extensive analysis of the revised HAMP PRA, including the determination by the Treasury Department to begin using Troubled Asset Relief Program (TARP) monies to make incentive payments to Fannie Mae and Freddie Mac..." 


Of course, there were a plethora of other ways Timmmay's targeted principal reduction program hope and dream program would have benefitted those best friends forever of the NYFRB, also. Think of it as TARP/TALF version 2.0 (or 3.0; or 4.0; which one are we on now?).

Ya' dig?

bonderøven-farm ass's picture

Methinks Eddie will be 'retiring' from his post shortly.

Jonas Parker's picture

Dear Timmy:

Fuck you, the horse you rode in on, and the pack mule carrying your supplies.




goodrich4bk's picture

Dear Timmy:

Fuck you.

Stronger letter to follow.



Bananamerican's picture

"Dear acting Director DeMarco,

You're Italian....What part of Ponzi don't you understand?? The Pon or the fucking Zi??"

yours etc,

little Timmy Geethner




Element's picture

They need to get another Goldman Sachs derived super-crook slotted into that position fast.

azzhatter's picture

Dear Mr. Geithner,


Fuck You hard up the ass with a pole axe.


Sincerely, A taxpayer(something you know little about)

Manthong's picture

..from each according to his ability, to each according to his need.

malikai's picture

...from each according to my desire, to me according to my wish..

Henry Hub's picture

"..from each according to his ability, to each according to his need."

From each according to his ability to steal, to each according to his greed. Fix it for ya!

Also should get Marx turning in his grave

Totentänzerlied's picture

Marx is giddy because capital (with the help of the state) is destroying itself, he said it would, though not quite in the way it actually is/has/will. And the proletariat gets thrown under the bus, again.

ElvisDog's picture

And this one is a stunner:  ".... and result in a net benefit to taxpayers"

So, the taxpayer who are the people standing behind these government guarenteed loans benefits from having the principal reduced? It really is going to be a hoot when the taxpayer gets presented with the bill for all these guarentees and it turns out the taxpayer doesn't have the money to make good on them.

Rainman's picture

FHA is Uncle Sam's 3rd bad bank, largely overlooked by our governing overlords. They've been fudging their anticipated delinquency rates, which are independently estimated to come in at 30% within 5 years for the 07-09 vintage underwriting.

FlyoverCountrySchmuck's picture

I'm SURE we will all be seeing this, along with an explanation of why Socialism ALWAYS fails, on tonight's network Evening News shows, right??


Is this thing on.....?

Atlantis Consigliore's picture

Yah, das Real Estate is gefallen, un the 12 mio undervasser is goot,  print more Herr Bernanke, mit der floaten das Bismark uber alles.

and now a word from my street Pro in REEEl Estate, kicking the can down the road a little longer with Barney...

swing it....

PiratePiggy's picture

Where's the beef, Mr ParkAveFlasher?  ;)

Jim in MN's picture

"The canned pork & beans crisis is contained."

--Timben Geithnanke, March 2016

Temporalist's picture

I haven't lived beyond my means yet.  When is my turn?  I know I can do it if I just had a chance.

SemperFord's picture

Not everybody lived beyond their means...Crazy how everyone is ready to blame the homeowners, even the Tylers on this one.

The truth is that the MAJORITY of the people who bough during the housing bubble have already lost their homes. Unless some here think people have been living rent free since late 2006(the peak here in Los Angeles) Things are simple worse for those in the middle class than some think.

So wait, Fannie and Freddy get bailed out and now they don't want to write down loans? So they get free money just like the banks and they dont want to write down so people can afford to live there. Well, ok then let them not pay a mortgage, the house will be left vacant for many months, broke students will not buy it and then more governement banker/Investors will buy them for pennies on the dollar(at least here in Los Angeles)

I mentioned weeks ago about JCP laying off employes before their CEO bailed and their stock had been going down. I talk to people and figure things out but don't blame the working class.

FACT: Dish and Direct TV have been doing well due to so many umemployed people watching tv since jobs are hard to find but Direct TV has layed off some people and Dish has limited overtime. In about a year they will see a reduction in customers just from unemployment benefits going down, so these people that get laid off or working less are not living beyond their means. 

Going to some clubs here and they are not full, in fact, when we get a table it is normally 240 for bottle service, just this Sunday they offered it to us for $100, they are hurting too. 

Fuck the bankers and fuck the fed and DC. 

While I have said that the majority of Americans are stupid, it's because they trust thier politicians to do the right thing. If I were to run for President I would vow to be publicly executed if the majority of public felt I did something to harm the US. You can bet right quick the Fed would be gone withing 1 second and maybe my life would be ended quite quick as well.


Temporalist's picture

Wow you arrived at some incredible conclusions from one comment I made about nobody in particular...

SemperFord's picture

What conclusion? I stated a fact about JCP, DISH, Direct TV, patronage being down around lots of places, other ZH's have mentioned it about stores. 

Thing about your comment was that the majority that lived over their means have already lost their homes, down payments and yet they keep being blamed while the bankers have their jobs and bonuses from us the tax payers, that is all I meant. 

To the junkers, I don't mind getting junked(red badge of honor) but man up and explain why...



Temporalist's picture

You did it again.  Tell me you don't realize that you did it again.

NotAMathWhiz's picture

Because you just told us you're blowing your money in a club while bitching that you can't pay your mortgage, all the while expecting me to bail you out.

Try really living within your means and paying your bills.

SemperFord's picture

When did I ever mention that about me??? take your medication and go back to school, son.

knukles's picture

Do I have to junk you first before I man up?

PiratePawpaw's picture

"Not everybody lived beyond their means...Crazy how everyone is ready to blame the homeowners, even the Tylers on this one."


True, not everybody, just most. Through the  80's and 90's I was in construction in the suburban sprawl north of the DFW Metroplex. They advertised the prices of the homes for each subdivision on huge signs "starting from the $1,000,000's" etc. These houses were pieces of ----. worth 50k tops. But suckers bought in lock stock and barrel; sure that prices could "only go up".

A few years later, as a mailman, I delivered certified letters from the grocery stores(bounced checks) to these same houses. The house looked nice, they had a new Lexus in the driveway, and the lawn was manicured. But when they answered the door you could see that a bean bag chair, a tv-tray and a tv on a milk-crate was what they had for furniture.

They sunk everything into these "McMansions", barely making the payments, thinking to retire and flip them for a profit.

Surprise! the price didnt go up. These are the underwater folks wanting a bailout. Tell me they didnt know they were living above their means!

SemperFord's picture

PP, I am talking about homeowners, not people looking to flip and home, you are way right because it also happened during this bubble. I am also stating that the majority that bought at the peak or before have already lost their homes and that a good amount now have lost wages due to losing jobs.

El Viejo's picture


I also know of good, decent, charitable people who have lost their homes too.  Bubbles punish the good as well as the bad, but in this case the bad were bailed out and the good were mocked for trusting the bad to be as good and decent as they were, but maybe judgement day hasn't quite arrived yet:


MachoMan's picture

If you purchase a home on credit, then you are a speculator...  period, end of story.  Please do not try and differentiate between flippers and anyone buying a home to live in...  there is simply no difference nor should there be any public policy support for different treatment.

PiratePawpaw's picture

I agree that there are responsible people who are losing their homes due to lost wages. And that is a shame. But my point is that people (and they were homeowners) were making bad decisions 25-30yrs ago, and it was obvious to a 25yr old construction worker at the time. Why should they be subsidized for their bad decision?

Whether it be homeowners, Bankers, or Investors; I think "caveat emptor" buyer beware. If you make a bad call, accept it. Dont expect a "mulligan".

BTW, I didnt junk you.

SemperFord's picture

Like I said I agree with that, NO BAILOUTS, let them all fail but now we have selected bailouts or..."Theft"

harleyjohn45's picture

Anyone who bought 25-30 years ago and is still living in the same house should not ever be underwater.  Todays prices are still higher than 25 years ago.  The ones that bought 25 years ago and refinanced every time they wanted a car or vacation are screwed as they should be.

Bob's picture

They bought into an "investment" scheme constructed and promoted by the banks, real estate and financial industries as a whole.  Who would be willing to live without furniture without the illusion that the sacrifice was for a longer-term goal that would make it worthwhile?

Now they're the guys who eat the loss, rather than the organized professional fraudsters who already got paid. 

At least it ain't socialism.  But, then again, neither is it a surprise. From April, 2006:

It should be obvious to everybody that the government/taxpayers shouldn't be covering the tab.  But when banksters own the government, that's how it goes.  So now we sink to neighbors blaming neighbors (except in the Hamptons.)

XitSam's picture

If someone is unemployed and on "unemployment benefits" why the hell are they not out looking for a job or polishing their resumé instead of paying for and watching satellite TV? If they must watch TV, local is free!

SemperFord's picture

I agree but I am telling you what installers for these companies tell me. Talking to some of their customers, some, not all are recently laid off(husband or wife) and wanting to collect checks for sometime, probably because Obummer has extended it for some time. I am not talking about me, I don't watch TV.

NotAMathWhiz's picture

So spending $240 to go to a club and get bottle service, whatever that is, must be part of your definition of being able to afford to live there?  Sorry, but that seems to be a twisted view of living within your means.

I do live within my means, and I have never spent anywhere near that much to hang out in a 'club'.  The sad part about this is that now I'm going to need to bail out people like you, people that think being able to spend $240 for bottle service is some sort of right, and then have the balls to bitch about it.


SemperFord's picture

I work and do not and will never need your money. I don't go in by myself and think I'm some baller throwing money away so quit jumping to conclusions. We go in as a group, it's better than buying expensive drinks and the point(which you obviously missed) was that they are now charging $100 where at least 6 months ago it was $240

WillyGroper's picture

Perhaps that bottle service comes with a complimentary Nuk.

MachoMan's picture

So you used middle class and bottle service in the same post...  clearly you're on the front lines...

Totentänzerlied's picture

The entire western world has been living beyond its means since before you were born. It's systemic. Relative to the very high baseline, some live a little further beyond than others, some less so.

The effects, via normalcy and anchoring biases, this has had on our society are incredible, surreal even. An unimaginable amount of wealth and natural resources (a form of wealth, of course) has been squandered and destroyed to sustain the unsustainable.

People in the rest of the world are lucky to have an apartment and double so to have a car, and you're telling me about bottle service and club occupancy? Easy money is the ultimate weapon. We call people poor who can use their EBT to buy most anything they please at every major retailer. It's a psychological weapon.

zarjad's picture

Let's make it fun and allow principal reduction only for those who refinanced and got cash out. They did live beyound their means. They needed boats and Lexuses! It's only fair.

benbushiii's picture

I have a better solution, why not clawback the spreads on the loans and the underwriting fees from the Banks and individuals that benefited from the original loans.

camaro68ss's picture

I have a better idea, Dissolve the FRB and have them take the hit on FRN. After all, all house were paid for with FRN.

XitSam's picture

Come on, Timmy didn't write this letter, TurboWrite did.